ICIS WEBINAR: New trends show companies reshoring supply chains, sustainability on hold

Author: Juhi Varma

2020/06/02

HOUSTON (ICIS)--Recent supply chain disruptions have prompted companies to seek out raw material providers closer to home, said ICIS lead analyst Rhian O’Conner.

ICIS data also indicates that sustainability and recycling will be put on hold for the next few years, as germ-wary consumers are likely to turn to single-use plastic packaging, bottles and gloves.

O’Conner was among the speakers in a webinar, part of a series hosted by ICIS.

SUPPLY CHAINS
Reliance on China for raw material or a manufacturing part severely disrupted the operations of most companies worldwide.

“Many people found, going into the crisis, that they were overexposed to China as a source of raw material at some point along their chain,” said O’Conner. “When specifications come up again and people are searching for raw material providers, there is a strong possibility they will go closer to home.”

O'Conner expects there will be a rise in North American companies looking to reshore supply chains. While it will not happen overnight, there is definitely a move now to simplify logistics.

SUSTAINABILITY WILL BE AN UPHILL BATTLE
The coronavirus outbreak brought about a reversal in previous trends towards multi-use products and away from single-use items as the sanitary benefits of single use plastic bags, cups and other items are allowing these products to win back market share.

Multiple US cities have suspended their single-use plastic bans.

In the US, for health and hygiene reasons, plastic bags are being used in the supermarket again, instead of cloth bags for sanitary reasons. Many cafes and restaurants are refusing to refill reusable containers.

“While many observes believe that the sustainability trend will remain dominant over the longer-term, this agenda may take a back seat over the next few years due to the cost advantages and sanitary benefits of single-use plastics,” said O’Conner.

In addition, lower oil prices significantly reduce the costs of producing virgin plastics while the costs of producing recycled plastic alternatives are driven more by labor costs and collecting and sorting costs and therefore do not decrease in a world of cheaper oil.

This puts recycled resins at a greater economic disadvantage relative to virgin resins.

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