The world of commodity goods and services may seem static to outside observers, but behind the curtain there is almost always a seething churn of battles occuring between competitors and with vendors. In the high volume, low margin world of commodity polymer manufacture, the price of resin (or “plastic”) feedstocks is subject to the variability of the global hydrocarbon market.  The market determines your price and your costs. The trick is to avoid getting squeezed when unit costs and prices converge.

In the resin film and injection molding business, the ability to raise prices is constrained by the complex relationship between the manufacturer of polymer resins and the buying side of the market. The relationship between thermoplastic polymer (i.e., PE, PP, PS) manufacturers and the end user is not always direct. 

The actual manufacturers of thermoplastic polymers produce their resin product in the form of squat little beads. There are several reasons for this. Beads are what you get when you cut extruded spaghetti noodles from the output side of the polymer reactor. This cutting process happens in a stream of water to remove process heat. The water rapidly cools the resin and prevents the beads from agglomerating. It also provides a means of conveyance to move the beads elsewhere in the processing facility.

The beads are removed from the water and subsequently moved to silos by pneumatic conveyance.  Beads have the happy property of flowability. You can pour beads into a properly designed hopper and they will flow by gravity into a rail car or an extruder.

There is an intermediary customer called the converter. The converter buys resin beads from a manufacturer or distributor and converts them into higher value forms. Converters make films and injection molded items from these resin beads. Converters practice a high art. Some of their products, like films, may be pure resin.  But a great many other products in the injection molding arena are highly modified with additives that provide desired attributes in the molding process itself or in the finished good. Additives are the output of a highly specialized industry.

Because the polymer market is very competitive, it is difficult for any given producer or converter to simply raise their prices. One of the tricks of the trade is something called “down gauging”.  It is simple to understand. To improve manufacturing economics, converters will make their films thinner (in resonse to marketers of films) so as to make more sq meters of film with the same material input. The reader may have noticed that over time, plastic bags or wrappers have gotten much thinner. This is the result of down gauging.

Converters have to face material limitations in their resin feedstocks. For films, melt strength is one of the key parameters in processability and a big selling point for manufacturers of resin feedstocks. When you make a blown polymer film, your are actually extruding molten resin through an annular die to form a cylindrical bubble. The bubble rapidly cools to form a continuous tube of film that is then rolled as is, or slit to form a continuous sheet. This is a very common technique for making commodity films. If the molten bubble is not strong enough to withstand the effects of gravity and processing forces, it will collapse and fail.

One of the improvements to come along beginning in the early 1990’s is the availability of metallocene polymers, specifically mPE.  This technology provides for greater control over the molecular structure of the polymer and subsequently, greater control of the rheology of polymer melts. Improvements in melt strength can lead to greater processing controllability for the converter and more options in gauge.

If you want to understand the PE and PP industry, you have to understand the relationship between resin manufacturers and converters. While converters do not drive the boat exclusively, they do have a large input into which direction the boat is pointed.