The HDPE pipe market is experiencing an extreme resin shortage. As of July 2021, HDPE pipe manufacturers have experienced pricing increases for resin totaling 60 cents per pound since January 2020. Prior to 2020, resin prices typically increased between one and two cents per pound annually. HDPE pipe manufacturers now have limited supplies due to the resin shortage. At minimum, recovery is expected to take until year end 2021 and likely much longer.
Current HDPE pipe order backlog is between six and eight months industry-wide. This year, demand for UPS’ HDPE products, from building supply to municipal, utility, gas and conduit, has significantly increased compared to 2020. Increased demand is further exacerbating the supply/demand imbalance. No new resin manufacturing facilities are expected to come online during 2021, which will continue to limit resin supply and manufactured pipe.
In order to improve the market imbalance, resin manufacturers need a minimum of 90 manufacturing days (at 100% production capacity without disruption) to build up the necessary stock inventory levels. UPS believes this will be historic in and of itself. Only five resin manufacturing facilities service the $10 billion U.S. HDPE pipe market. All five facilities are in the U.S. Gulf Coast, subjecting them to shutdowns related to seasonal weather events.
Weather-related disruptions typically occur during hurricane season (June – November) as resin facilities shut down in advance of significant storms to prepare for the flooding, high winds and associated power outages. Plant shutdowns are not exclusive to hurricane season, as manufacturers experienced in February 2021, during a Gulf Coast cold weather event. Shutdowns occurred because resin facilities had not been weather-hardened for the extreme, prolonged freezing conditions.
All indicators point further upward for 2022 HDPE pricing. In addition to the steady increases taken throughout 2020, suppliers have made pricing increases every month of 2021.
How UPS and industry can improve the supply/demand imbalance
As a manufacturer, we believe certain steps can be taken to bring supply and demand in balance. For non-pressure conduit, HDPE pipe manufacturers have the ability to use recycled materials. By returning this material back into the production process we maximize consumption, which allows us to use less conduit material overall during pipe manufacturing. This frees up our ability to manufacture more medium-density and high-density pressure materials. The recycling process includes pelletizing our pre-processed piping (primarily transition material), and potentially material returned to us from the field that is inspected, cleaned and processed, and re-introducing the material into the non-pressure conduit manufacturing process.
“We are hopeful that the industry as a whole takes this step, as we have done, because we need to free up additional supply for increasing pressure market demand,” said Logan Bridges, UPS Vice President Marketing, Strategy and Commercial Operations, during the recent Utility Solutions Conference.
In addition to recycling, we believe utilities have an opportunity to improve the supply/demand imbalance by broadening piping specifications and requirements for materials, suppliers and manufacturers. Constrained supply across the entire industry is not good for anyone and we want everyone to be able to get the materials needed to complete projects. To achieve this, utilities must look at their specifications and broaden them for approvals.
Commitments to specific materials limit the availability of pipe manufacturers in high-demand situations. Being exclusivity tied to a resin supplier (through narrow specifications) unnecessarily limits utilities. For example, if a utility has a specification that can only be produced by a single manufacturer and/or resin supplier, when that supplier goes offline, this negatively effects the supply capability of all suppliers.
Asking utilities to broaden their material specifications, resin suppliers, and pipe extrusion manufacturers would be a significant step in allowing municipal and public utilities get through tight markets by providing manufacturing alternatives that do not currently exist.
Restoring the supply/demand balance will take time
With limited resin supply, zero additional resin manufacturing capacity increases expected and continued high consumer demand for products, UPS expects HDPE pricing will remain high for the near to medium term. We expect it may take a number of years for a full pricing recovery and see limited immediate relief on the horizon. For any HDPE market recovery (whether immediate or lengthy) to occur, resin suppliers must first restore their supply inventory. In addition to recycling by manufacturers, utilities must consider broadening their piping specifications.
About United Poly Systems
United Poly Systems produces quality HDPE pipe in diameters from ¾-in. to 26-in. IPS, 4-in. to 24-in. DIPS and ¾-in. to 2-in. CTS for use in many industries including telecommunications, power utility, water, electrical and oil and gas. The market for HDPE pipe continues to expand as initiatives to improve, repair and expand the country’s infrastructure are implemented.
Our off-the-shelf HDPE conduit/pipe is available in a variety of sizes, colors, dimensions and lengths, with or without stripes. We also offer fully customizable HDPE conduit options. In addition, piping can be customized with a ribbed interior (to maximize the distance cable may be pulled or jetted), pull tape, or a lubricated interior (for easier installation).
Success at UPS can be attributed to our vast experience, extensive client relationships, state-of-the-art manufacturing and quality processes. Our agile business model that allows UPS to quickly meet customers’ needs without the overhead expenses that are incurred by many of the larger producers in the industry.
Conveniently located in Springfield, Missouri and Albuquerque, New Mexico, United Poly Systems can provide quick delivery to a majority of the U.S. market.