1 00:00:10,080 --> 00:00:13,440 Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast. 2 00:00:13,520 --> 00:00:16,880 Speaker 1: I'm Tracy Alloway and I'm Joe. Wasn't all Joe? Do 3 00:00:16,920 --> 00:00:20,160 Speaker 1: you know what a nerdle is? No? Is that like 4 00:00:20,280 --> 00:00:25,880 Speaker 1: something related to wordle? Uh? No, sounds like a nerdier. 5 00:00:26,960 --> 00:00:30,040 Speaker 1: A nerdle is. It's like that tiny little pellet or 6 00:00:30,240 --> 00:00:35,239 Speaker 1: bead of plastic which is used to make bigger plastic items. 7 00:00:35,360 --> 00:00:37,600 Speaker 1: I had no idea. Yeah, it's It's one of my 8 00:00:37,640 --> 00:00:40,120 Speaker 1: favorite words, and this episode is really just an excuse 9 00:00:40,159 --> 00:00:43,280 Speaker 1: for me to say nerdle several times. But today we 10 00:00:43,320 --> 00:00:46,519 Speaker 1: are going to be talking about the plastics market, which 11 00:00:46,560 --> 00:00:51,000 Speaker 1: I kind of think is an underappreciated thing in global 12 00:00:51,000 --> 00:00:54,720 Speaker 1: supply chains but also potentially in inflation. Yeah, it's super 13 00:00:54,840 --> 00:00:58,720 Speaker 1: interesting because plastics are obviously huge there in everything. They 14 00:00:58,760 --> 00:01:01,360 Speaker 1: package everything there omni president. But I feel like we 15 00:01:01,400 --> 00:01:03,760 Speaker 1: don't actually talk about plastics very much. I don't We've 16 00:01:03,760 --> 00:01:06,119 Speaker 1: never done a plastics episode, And by and large, look 17 00:01:06,120 --> 00:01:09,000 Speaker 1: when you read the news, you read about commodities or 18 00:01:09,040 --> 00:01:11,960 Speaker 1: things like that. I don't think there's actually much discussion 19 00:01:11,959 --> 00:01:15,800 Speaker 1: about the plastics industry, right, So I wrote a tiny 20 00:01:15,880 --> 00:01:19,000 Speaker 1: bit about it in one It was based off of 21 00:01:19,040 --> 00:01:21,720 Speaker 1: this great Bank of America note talking about how there 22 00:01:21,800 --> 00:01:25,720 Speaker 1: was this huge arbitrage opportunity that had opened up between 23 00:01:26,080 --> 00:01:30,679 Speaker 1: US and European and Asian plastics markets, and the price 24 00:01:30,720 --> 00:01:33,600 Speaker 1: of plastic at the time was just going absolutely nuts 25 00:01:34,080 --> 00:01:37,479 Speaker 1: like everything at that time. Since then, it has come 26 00:01:37,640 --> 00:01:41,080 Speaker 1: crashing down. So we flipped from record high plastic prices too, 27 00:01:41,200 --> 00:01:43,520 Speaker 1: I think a two year low. So it's kind of 28 00:01:43,560 --> 00:01:45,720 Speaker 1: similar to what we've seen with a lot of commodities, 29 00:01:46,000 --> 00:01:49,160 Speaker 1: a lot of different types of consumer goods, which means 30 00:01:49,200 --> 00:01:51,080 Speaker 1: that we need to check in on what's going on 31 00:01:51,120 --> 00:01:53,120 Speaker 1: with the market. Let's do it, because, like I said, 32 00:01:53,120 --> 00:01:55,120 Speaker 1: I'm kind of starting from scratch. I don't know anything. 33 00:01:55,160 --> 00:01:56,920 Speaker 1: I don't know what a nerdle is, but more importantly, 34 00:01:56,960 --> 00:01:58,960 Speaker 1: I really don't know anything about it, about the plastics 35 00:01:58,960 --> 00:02:02,240 Speaker 1: industry at all, which is kind of indefensible for such 36 00:02:02,280 --> 00:02:04,360 Speaker 1: a such an important part of our lives. We'll just 37 00:02:04,440 --> 00:02:07,360 Speaker 1: keep saying nerdles. Okay, Well, we have the perfect guest 38 00:02:07,640 --> 00:02:09,520 Speaker 1: to discuss this. We're going to be speaking with the 39 00:02:09,560 --> 00:02:12,680 Speaker 1: author of that analyst report that I just mentioned. We're 40 00:02:12,720 --> 00:02:14,600 Speaker 1: going to be speaking with Warren Russell. He is a 41 00:02:14,600 --> 00:02:17,800 Speaker 1: commodity strategist at Bank of America, and he's going to 42 00:02:17,800 --> 00:02:20,520 Speaker 1: give us the lowdown on neurdles and what's going on 43 00:02:20,600 --> 00:02:23,760 Speaker 1: in the plastic market right now. So Warren, thank you 44 00:02:23,800 --> 00:02:25,720 Speaker 1: so much for coming on all thoughts, thanks for having me. 45 00:02:26,080 --> 00:02:29,000 Speaker 1: So maybe just to begin with a very basic question, 46 00:02:29,080 --> 00:02:32,320 Speaker 1: but when we talk about the price of plastic, what 47 00:02:32,440 --> 00:02:36,960 Speaker 1: are the sort of ingredients or factors that go into that. Sure, 48 00:02:37,120 --> 00:02:42,120 Speaker 1: so you know, the primary feedstock for this comes from oil. Um, 49 00:02:42,200 --> 00:02:47,119 Speaker 1: So when we think about the fundamental pricing of plastic, 50 00:02:47,160 --> 00:02:49,840 Speaker 1: it comes down to a large degree with what's happening 51 00:02:49,880 --> 00:02:52,000 Speaker 1: with oil. But there are a lot of other nuances 52 00:02:52,040 --> 00:02:56,960 Speaker 1: as well with regards to capacity within the plastic space, um, 53 00:02:57,120 --> 00:03:00,400 Speaker 1: the ability to meet demand. So is there enough capacity 54 00:03:00,480 --> 00:03:03,120 Speaker 1: to meet demand? Uh? And obviously during the last few 55 00:03:03,200 --> 00:03:05,720 Speaker 1: years we've had a bit of a challenge doing that, 56 00:03:05,840 --> 00:03:09,079 Speaker 1: and so you've seen some disconnects in price between what 57 00:03:09,120 --> 00:03:11,320 Speaker 1: oil is doing and what some of the plastics are doing. 58 00:03:11,680 --> 00:03:15,040 Speaker 1: So talk to us a little bit more. First of all, um, 59 00:03:15,120 --> 00:03:19,160 Speaker 1: within the broader world of petroleum consumption. You know, we 60 00:03:19,240 --> 00:03:22,880 Speaker 1: think about cars, think about jet fuel. How big is 61 00:03:22,960 --> 00:03:27,160 Speaker 1: plastics and then talk to us about that refining component. Again, 62 00:03:27,200 --> 00:03:31,160 Speaker 1: we talk about gasoline refining, and we talk about diesel 63 00:03:31,280 --> 00:03:34,480 Speaker 1: and all that, But in terms of the process for 64 00:03:34,720 --> 00:03:37,920 Speaker 1: turning oil petroleum into plastics, what do we talk about 65 00:03:37,920 --> 00:03:42,680 Speaker 1: in terms of capacity, spare capacity, how tights? That got sure? So, UM, 66 00:03:42,720 --> 00:03:44,960 Speaker 1: I guess I should just start with where this is 67 00:03:44,960 --> 00:03:47,480 Speaker 1: all coming from. So when when you drill a well, right, 68 00:03:47,520 --> 00:03:50,240 Speaker 1: you've got most people just think of gas in oil, 69 00:03:50,280 --> 00:03:53,160 Speaker 1: but you actually have a broad spectrum of what we 70 00:03:53,200 --> 00:03:55,800 Speaker 1: call hydrocarbons coming out of the ground. And so you'll 71 00:03:55,840 --> 00:03:59,440 Speaker 1: have the very heavy, viscous stuff that looks like it 72 00:03:59,480 --> 00:04:01,240 Speaker 1: feels like peanut butter. And then you've got the very 73 00:04:01,320 --> 00:04:05,320 Speaker 1: light stuff, which is pretty much natural gas or methane UM. 74 00:04:06,000 --> 00:04:10,120 Speaker 1: And in between you've got uh, just just after methane. 75 00:04:10,520 --> 00:04:13,640 Speaker 1: We call them hydrocarbon chain. So you start with methane 76 00:04:13,720 --> 00:04:17,160 Speaker 1: with with one C h t C is ethane, three 77 00:04:17,200 --> 00:04:20,680 Speaker 1: C is propane uh and and up the stream. UH. 78 00:04:20,720 --> 00:04:25,200 Speaker 1: The plastics come from the light ends of that. So 79 00:04:25,360 --> 00:04:29,120 Speaker 1: you you drill a well, you're producing oil, you're producing 80 00:04:29,200 --> 00:04:32,160 Speaker 1: what we call wet gas. UH. That wet gas is 81 00:04:32,320 --> 00:04:35,200 Speaker 1: separate out into different streams. So you're gonna split out 82 00:04:35,600 --> 00:04:38,040 Speaker 1: most of the natural gas. There'll be some ethane in that, 83 00:04:38,080 --> 00:04:41,400 Speaker 1: but it recovers some methane UH that in the US 84 00:04:41,520 --> 00:04:44,680 Speaker 1: is used heavily in our pet com industry. You're also 85 00:04:44,720 --> 00:04:49,000 Speaker 1: producing propane and butane uh and what we call c 86 00:04:49,200 --> 00:04:53,960 Speaker 1: fives as well. You you know, that is a large 87 00:04:54,000 --> 00:04:57,880 Speaker 1: component of of the feedstock for for the pet com sector. 88 00:04:57,960 --> 00:05:01,200 Speaker 1: You also producing some of these feedstock from the refinery 89 00:05:01,240 --> 00:05:03,400 Speaker 1: to so you know you can pull those other streams. 90 00:05:03,480 --> 00:05:06,719 Speaker 1: Naptha to a large degree comes from refining to. So 91 00:05:07,279 --> 00:05:10,239 Speaker 1: can you talk to us about the types of plastics, 92 00:05:10,279 --> 00:05:12,560 Speaker 1: because there are a bunch of different types, but they 93 00:05:12,560 --> 00:05:15,159 Speaker 1: all kind of sound similar and have similar acronyms, which 94 00:05:15,200 --> 00:05:19,000 Speaker 1: is a little confusing. No, I think we have uh. 95 00:05:19,040 --> 00:05:22,320 Speaker 1: You know, a large focus is on what we call 96 00:05:22,440 --> 00:05:26,440 Speaker 1: the poly released into our market's polyethylene, polypropylene. So you 97 00:05:26,480 --> 00:05:31,000 Speaker 1: have these acronyms like HDPE, which is high density polyethylene. 98 00:05:31,240 --> 00:05:35,520 Speaker 1: You've got low density polyethylene LDPE. You've got linear low 99 00:05:35,600 --> 00:05:39,400 Speaker 1: density uh that sort of rounds out the polyethylene space. 100 00:05:39,520 --> 00:05:44,560 Speaker 1: Then you've got polypropylene, which you know that's a polymer 101 00:05:44,680 --> 00:05:48,280 Speaker 1: version of of propylene, which you can talk about further. 102 00:05:48,640 --> 00:05:50,880 Speaker 1: And then you've got p ET, which is what we 103 00:05:50,960 --> 00:05:54,279 Speaker 1: see a lot of plastic bottles made out of UM 104 00:05:54,360 --> 00:05:59,520 Speaker 1: that is polyethylene tarith alley um. That's not how I 105 00:05:59,560 --> 00:06:02,880 Speaker 1: would have pronounced that I learned something new. Okay, Well, 106 00:06:03,040 --> 00:06:07,760 Speaker 1: well I think you've got PBC um, which I think 107 00:06:07,839 --> 00:06:12,760 Speaker 1: most people are familiar with the polyvinyl chloride um. What 108 00:06:12,800 --> 00:06:16,920 Speaker 1: else polystyrene? Yeah, because I mean and then there's all 109 00:06:16,960 --> 00:06:20,000 Speaker 1: sorts of um UM. And so just to be clear, 110 00:06:20,080 --> 00:06:23,800 Speaker 1: all of these different acronyms, different pollies, etcetera, it's just 111 00:06:23,920 --> 00:06:27,560 Speaker 1: slightly different purposes. So there's you know, you might have 112 00:06:27,640 --> 00:06:30,200 Speaker 1: a plastic bottle for like a diet coke or something, 113 00:06:30,520 --> 00:06:32,280 Speaker 1: and then like I don't know what would be like 114 00:06:32,520 --> 00:06:36,839 Speaker 1: the clamshell plastic like a baker. Yeah, I mean you 115 00:06:36,880 --> 00:06:40,720 Speaker 1: can make that UM from one of the blow mo 116 00:06:40,720 --> 00:06:45,600 Speaker 1: old poly ethylene type. This would this would be a 117 00:06:45,640 --> 00:06:50,960 Speaker 1: good game to like just throw out items about I 118 00:06:50,960 --> 00:06:54,600 Speaker 1: think that there are what about like like my daughter's toys, 119 00:06:54,640 --> 00:06:57,120 Speaker 1: like a dollhouse or something made out of place. I 120 00:06:57,160 --> 00:07:00,000 Speaker 1: guess it depends, but you know you can you can 121 00:07:00,400 --> 00:07:04,000 Speaker 1: pull in all sorts of things. For example, with polypropylene, 122 00:07:04,240 --> 00:07:07,680 Speaker 1: you know that goes into UM. Automotives that goes into 123 00:07:07,720 --> 00:07:10,480 Speaker 1: what we call the white glove, big ticket items that 124 00:07:10,600 --> 00:07:16,920 Speaker 1: consume these plastics that are primarily used in packaging. So you, um, 125 00:07:16,960 --> 00:07:25,400 Speaker 1: the polyethylene polypropylene UM PET are largely consumed by plastic packaging, 126 00:07:25,400 --> 00:07:29,040 Speaker 1: maybe more UM, and then you sort of branch out 127 00:07:29,080 --> 00:07:33,400 Speaker 1: into like PVC, which is heavily used in construction. So 128 00:07:33,520 --> 00:07:37,960 Speaker 1: the okay, but whether it's h d p E or 129 00:07:38,080 --> 00:07:42,560 Speaker 1: ld P E or PET or PVC or whatever like, 130 00:07:42,600 --> 00:07:44,840 Speaker 1: it comes from hydrocarbons in the ground and then it 131 00:07:44,880 --> 00:07:48,360 Speaker 1: gets refined into plastics and then presumably there's like a 132 00:07:48,480 --> 00:07:52,560 Speaker 1: storage and transportation cost on top of that. Talk to 133 00:07:52,640 --> 00:07:57,360 Speaker 1: us about what happened in with plastics prices, because this 134 00:07:57,400 --> 00:08:00,160 Speaker 1: is where I was first introduced to your work. Well, 135 00:08:00,320 --> 00:08:03,600 Speaker 1: plastics really going gangbusters and lots of interesting things happening 136 00:08:03,600 --> 00:08:06,240 Speaker 1: in the market. Yeah, I mean there were a lot 137 00:08:06,280 --> 00:08:09,320 Speaker 1: of things happening sort of all at once. The point 138 00:08:09,320 --> 00:08:13,360 Speaker 1: that I was making earlier on UM capacity became an 139 00:08:13,400 --> 00:08:18,040 Speaker 1: issue where uh, the U S sector specifically is susceptible 140 00:08:18,120 --> 00:08:22,000 Speaker 1: to storms. UM, So we had hurricanes which can take 141 00:08:22,040 --> 00:08:26,880 Speaker 1: down these these plants. Uh, we had the deep freeze. Uh. 142 00:08:26,920 --> 00:08:31,160 Speaker 1: If you remember in one UH that also took down 143 00:08:31,160 --> 00:08:34,040 Speaker 1: plans for a long time, and um, you know that 144 00:08:34,120 --> 00:08:38,320 Speaker 1: really the market was already sort of tight into that um, 145 00:08:38,480 --> 00:08:40,880 Speaker 1: meaning we didn't have a whole lot of incremental supply 146 00:08:41,240 --> 00:08:44,520 Speaker 1: at that time, and these uh, these facilities went down. 147 00:08:44,760 --> 00:08:48,400 Speaker 1: The US market got very tight um at the same 148 00:08:48,440 --> 00:08:52,040 Speaker 1: time as the government was stimulating and people were spending 149 00:08:52,040 --> 00:08:55,840 Speaker 1: their checks on everything plastic um and so you know, 150 00:08:55,920 --> 00:08:59,800 Speaker 1: that was one thing that really, um, you know, helped 151 00:08:59,840 --> 00:09:02,640 Speaker 1: drive plastics up to these levels that we haven't seen. 152 00:09:03,240 --> 00:09:05,880 Speaker 1: You know, those plastic prices were trading at levels where 153 00:09:06,080 --> 00:09:08,559 Speaker 1: we would have expected them with oil over a hundred 154 00:09:08,600 --> 00:09:11,760 Speaker 1: dollars barrel at least. So you know, in a way 155 00:09:11,800 --> 00:09:14,040 Speaker 1: it feels like old news, but maybe it's not. I 156 00:09:14,080 --> 00:09:16,720 Speaker 1: don't think we actually ever did an episode where we 157 00:09:16,800 --> 00:09:21,079 Speaker 1: talked about the supply chain impacts of that Texas freeze 158 00:09:21,480 --> 00:09:26,080 Speaker 1: last March, but it seems like it has come up 159 00:09:26,200 --> 00:09:28,000 Speaker 1: a number of times in reading things like I think 160 00:09:28,000 --> 00:09:32,720 Speaker 1: there was something with like uh installation for like homes 161 00:09:32,800 --> 00:09:35,400 Speaker 1: got really disrupted. Can you talk about like how big 162 00:09:35,440 --> 00:09:37,000 Speaker 1: of a deal was that? Because I actually think it 163 00:09:37,080 --> 00:09:39,479 Speaker 1: might be kind of relevant now and we think about normalization. 164 00:09:39,640 --> 00:09:42,200 Speaker 1: We think inflation as sort of like one of the 165 00:09:42,400 --> 00:09:46,840 Speaker 1: underdiscussed supply chain disruptions of one of the last year. 166 00:09:47,080 --> 00:09:49,840 Speaker 1: How long lasting were the impacts of that Texas free 167 00:09:49,880 --> 00:09:52,040 Speaker 1: I mean, it took a long in the pet camp space. 168 00:09:52,080 --> 00:09:54,280 Speaker 1: It took a while for the US market to really 169 00:09:55,080 --> 00:09:59,439 Speaker 1: several months to to start to normalize even into and 170 00:09:59,440 --> 00:10:02,040 Speaker 1: then we you you know, in the US, we do 171 00:10:02,200 --> 00:10:04,760 Speaker 1: have a lot of capacity has been coming online over 172 00:10:04,760 --> 00:10:06,920 Speaker 1: the years. We've never really managed to run it all 173 00:10:07,000 --> 00:10:10,080 Speaker 1: at full We do struggle to balance the exports and 174 00:10:10,120 --> 00:10:13,160 Speaker 1: the domestic consumption um but it took a while to 175 00:10:13,200 --> 00:10:15,280 Speaker 1: get back up. And now in the last just in 176 00:10:15,320 --> 00:10:17,320 Speaker 1: the last few months, we've gotten up to sort of 177 00:10:17,320 --> 00:10:20,160 Speaker 1: record high inventories of PE and that's come down a 178 00:10:20,160 --> 00:10:21,839 Speaker 1: little bit in the lass two months, but still is 179 00:10:21,880 --> 00:10:23,600 Speaker 1: at very high level. So it did take a while. 180 00:10:23,840 --> 00:10:26,120 Speaker 1: You know. Another dynamic that people may or may not 181 00:10:26,240 --> 00:10:30,480 Speaker 1: have mentioned, is the the end consumer or or the 182 00:10:30,559 --> 00:10:33,880 Speaker 1: company that's making the bottles or um any of the 183 00:10:33,960 --> 00:10:39,000 Speaker 1: material with those plastic pellets, was you know, in an 184 00:10:39,080 --> 00:10:42,160 Speaker 1: in an ocrap moment where they're realizing, maybe we should 185 00:10:42,200 --> 00:10:45,320 Speaker 1: hold more of this on hand, right Inventories exactly, so 186 00:10:45,440 --> 00:10:48,720 Speaker 1: you had sort of justin tyn in inventory situation, sort 187 00:10:48,720 --> 00:10:52,520 Speaker 1: of globally moving more towards a just in case. Uh. 188 00:10:52,600 --> 00:10:55,000 Speaker 1: The unfortunate thing about that was that the just in 189 00:10:55,040 --> 00:10:57,960 Speaker 1: case time came when they really wasn't whole lot of supplies, 190 00:10:58,000 --> 00:11:01,080 Speaker 1: so people were sort of disregard price and just buying 191 00:11:01,440 --> 00:11:16,600 Speaker 1: at all costs. UM. So sounds familiar. So just going 192 00:11:16,640 --> 00:11:20,240 Speaker 1: back to the market structure for plastics, you know, you 193 00:11:20,280 --> 00:11:24,400 Speaker 1: were writing about this arbitrage opportunity um, and it was 194 00:11:24,440 --> 00:11:26,880 Speaker 1: a big arbitrage opportunity, but it was big because it 195 00:11:26,920 --> 00:11:30,240 Speaker 1: was actually difficult to do UM. And it kind of 196 00:11:30,280 --> 00:11:34,440 Speaker 1: had to do with the different market prices between the US, Europe, 197 00:11:34,960 --> 00:11:38,600 Speaker 1: and Asia, which kind of begs the question of is 198 00:11:38,600 --> 00:11:43,160 Speaker 1: there no like global standard for plastics prices in the 199 00:11:43,200 --> 00:11:46,319 Speaker 1: same way that we have like Brent versus w T 200 00:11:46,480 --> 00:11:49,200 Speaker 1: I right now. I mean, this is very regional um 201 00:11:49,320 --> 00:11:52,200 Speaker 1: rarey regional pricing. There's also pricing that you don't really 202 00:11:52,240 --> 00:11:56,440 Speaker 1: see uh that transparently either. Um. There's a spot market 203 00:11:56,559 --> 00:12:00,240 Speaker 1: and then there's a contract market. Uh. And so you know, 204 00:12:00,320 --> 00:12:03,400 Speaker 1: a large chunk of the plastics volume in the US 205 00:12:03,440 --> 00:12:08,600 Speaker 1: will be on contract and that's a price that's um 206 00:12:08,800 --> 00:12:12,720 Speaker 1: agreed upon between the producers of the plastic and the 207 00:12:12,760 --> 00:12:14,880 Speaker 1: consumers of the plastic. And there's obviously a lot of 208 00:12:14,880 --> 00:12:17,760 Speaker 1: give and take there, and sometimes there's questions around why 209 00:12:18,200 --> 00:12:20,040 Speaker 1: prices are what they are based on what you think 210 00:12:20,040 --> 00:12:23,120 Speaker 1: are the broader fundamentals, but it's very regionalized from that 211 00:12:23,200 --> 00:12:26,320 Speaker 1: regard um. It's also, uh, you know, it's not like 212 00:12:26,360 --> 00:12:30,199 Speaker 1: we have the same fungibility that you do with oil. Um. 213 00:12:30,280 --> 00:12:33,960 Speaker 1: The consumers of plastic maybe set up on a rail 214 00:12:34,000 --> 00:12:38,120 Speaker 1: line or um, you know, next to a facility, and 215 00:12:38,160 --> 00:12:43,120 Speaker 1: so there's um synergies there that are hard to arb 216 00:12:43,200 --> 00:12:46,960 Speaker 1: away UM. So you can't have like a pipeline for 217 00:12:47,080 --> 00:12:50,720 Speaker 1: neurtles just like yeah, I was gonna because like right, 218 00:12:50,720 --> 00:12:54,120 Speaker 1: with oil, like there are a diffusion of prices, but 219 00:12:54,240 --> 00:12:56,679 Speaker 1: it's kind of like they all moved together, whereas we 220 00:12:56,720 --> 00:12:59,400 Speaker 1: know that with natural gas it's not like that at all. 221 00:12:59,600 --> 00:13:02,400 Speaker 1: You can just have completely different movements in different directions. 222 00:13:02,440 --> 00:13:05,520 Speaker 1: And the reason is obviously the sort of fungibility and 223 00:13:05,640 --> 00:13:08,679 Speaker 1: this sort of like the nature of the global distribution 224 00:13:08,760 --> 00:13:11,600 Speaker 1: network is much more fragmented. So it's classics. What does 225 00:13:11,679 --> 00:13:15,040 Speaker 1: that look like such that you can have such persistent 226 00:13:15,080 --> 00:13:17,719 Speaker 1: wide variations. So I think the issue they had in 227 00:13:19,440 --> 00:13:23,960 Speaker 1: one was obviously the freight congestion. So um the wide 228 00:13:24,160 --> 00:13:28,920 Speaker 1: arms on paper looked wide partly because freight was so high. UM. 229 00:13:28,960 --> 00:13:32,200 Speaker 1: I think another issue that you had there is that, again, 230 00:13:32,679 --> 00:13:36,880 Speaker 1: if I'm set up to buy pellets a certain way, UM, 231 00:13:36,920 --> 00:13:39,320 Speaker 1: I may not actually be able to take advantage of 232 00:13:39,520 --> 00:13:42,440 Speaker 1: inbound pellets from the global market. And don't get me wrong, 233 00:13:42,520 --> 00:13:45,360 Speaker 1: this market is is there's a lot of trade. But 234 00:13:45,559 --> 00:13:53,400 Speaker 1: if you're talking about incremental incremental um, uh buying. If 235 00:13:53,400 --> 00:13:57,040 Speaker 1: you need, for example, to buy poly ethylene from the 236 00:13:57,120 --> 00:13:59,760 Speaker 1: US Gulf Coast and you're buying it and uh, what 237 00:14:00,120 --> 00:14:03,520 Speaker 1: call super sacks which are basically these polypropylene sacks that 238 00:14:04,160 --> 00:14:06,920 Speaker 1: um you put those in a container ship and send them. 239 00:14:07,240 --> 00:14:10,960 Speaker 1: Are they full of nerdles or something else? Just to 240 00:14:11,000 --> 00:14:15,400 Speaker 1: be clear in in sort of a quote unquote normal time, like, 241 00:14:17,480 --> 00:14:21,000 Speaker 1: is there more of a one global price for plastic 242 00:14:21,120 --> 00:14:22,320 Speaker 1: or is it always going to be this kind of 243 00:14:22,320 --> 00:14:24,880 Speaker 1: thing where it's not like oil In terms of the spreads, No, 244 00:14:24,960 --> 00:14:28,920 Speaker 1: I think that you will definitely see the I mean 245 00:14:28,920 --> 00:14:31,400 Speaker 1: you are seeing the arts come in. UM. So the 246 00:14:31,480 --> 00:14:33,600 Speaker 1: issue that we have right now, is that this market 247 00:14:33,640 --> 00:14:37,360 Speaker 1: is over capacity. UM. We've been talking about a market 248 00:14:37,400 --> 00:14:39,440 Speaker 1: that looked like it should have been an over over 249 00:14:39,480 --> 00:14:45,360 Speaker 1: supply since maybe was sort of one were these years 250 00:14:45,360 --> 00:14:50,240 Speaker 1: where you had UM sort of extra demand for goods, 251 00:14:50,440 --> 00:14:52,920 Speaker 1: which you know, when you line up demand for poly 252 00:14:53,000 --> 00:14:58,640 Speaker 1: athlene and polypropylene UM, they typically track, you know, directionally 253 00:14:58,720 --> 00:15:03,640 Speaker 1: with GDP. UH, those those UM demand for those plastics 254 00:15:03,680 --> 00:15:07,200 Speaker 1: increased or was flat when GDP was down what three 255 00:15:07,240 --> 00:15:10,480 Speaker 1: point three or whatever percent it was UM, and so 256 00:15:10,760 --> 00:15:13,600 Speaker 1: you know that was that was sort of a one 257 00:15:13,640 --> 00:15:17,280 Speaker 1: off dynamic. UM. Now I think we're starting to come 258 00:15:17,440 --> 00:15:21,840 Speaker 1: full cycle on economic expectations with a downturn expected for 259 00:15:21,920 --> 00:15:28,280 Speaker 1: next year. UM. You have with with that UH China reopening. 260 00:15:28,400 --> 00:15:32,800 Speaker 1: Arguably more broadly, you have decongestion in the global UM 261 00:15:32,840 --> 00:15:36,840 Speaker 1: supply chain, so you don't have quite the same congestion 262 00:15:36,880 --> 00:15:40,880 Speaker 1: at ports and you know, the box UH, the ability 263 00:15:40,920 --> 00:15:44,200 Speaker 1: to procure containers was a big issue back two years ago. 264 00:15:44,720 --> 00:15:49,080 Speaker 1: That's definitely UM not something you hear as much of 265 00:15:49,120 --> 00:15:52,800 Speaker 1: a problem now. So sort of decongesting all of that 266 00:15:53,160 --> 00:15:58,080 Speaker 1: should help facilitate narrower spreads between the regions and so 267 00:15:58,320 --> 00:16:00,840 Speaker 1: and you are starting to see. You know, European prices 268 00:16:00,880 --> 00:16:05,000 Speaker 1: are are still high, but um, people are moving volumes 269 00:16:05,040 --> 00:16:07,560 Speaker 1: into Europe to try to capitalize on that. So talk 270 00:16:07,600 --> 00:16:10,760 Speaker 1: to us about the capacity outlook then, because you've mentioned 271 00:16:10,760 --> 00:16:12,640 Speaker 1: that a number of times, and I remember when I 272 00:16:12,680 --> 00:16:14,600 Speaker 1: was based in Hong Kong, there were some stories about 273 00:16:14,680 --> 00:16:20,760 Speaker 1: China purposely building out it's um polypropylene capacity and and 274 00:16:20,800 --> 00:16:23,440 Speaker 1: things like that. Is that something that's going to impact 275 00:16:23,440 --> 00:16:26,160 Speaker 1: the market. I think that's something that has been catching 276 00:16:26,280 --> 00:16:28,320 Speaker 1: up over the last few years and is now starting 277 00:16:28,360 --> 00:16:29,920 Speaker 1: to rear its head. I think when you look at 278 00:16:29,920 --> 00:16:33,920 Speaker 1: both polly athlene and polypropylene, capacity growth still looks fairly 279 00:16:34,000 --> 00:16:36,880 Speaker 1: robust over the next year or two. UM. So you 280 00:16:36,960 --> 00:16:39,880 Speaker 1: sort of juxtapose that with what we expect to happen 281 00:16:39,920 --> 00:16:43,120 Speaker 1: with GDP and actual demand now that the stimulus checks 282 00:16:43,120 --> 00:16:47,200 Speaker 1: are fizzling out, people are not buying as much online. UM, 283 00:16:47,240 --> 00:16:50,520 Speaker 1: that demand for plastics is sort of like potentially could 284 00:16:50,520 --> 00:16:53,200 Speaker 1: come in a little worse uh than than normal trend 285 00:16:53,320 --> 00:16:55,800 Speaker 1: at a time when capacity is is ramping up. So 286 00:16:56,200 --> 00:16:58,880 Speaker 1: you know, this is a situation where, um, you may 287 00:16:58,880 --> 00:17:03,560 Speaker 1: be in h uh an environment where capacity rationalization is 288 00:17:03,600 --> 00:17:06,720 Speaker 1: required to help sort of short show up the balances. 289 00:17:07,400 --> 00:17:09,920 Speaker 1: So just on that note, one of one of the 290 00:17:10,640 --> 00:17:15,720 Speaker 1: PET theories PET, yeah, thank you. One of the PET 291 00:17:15,800 --> 00:17:19,120 Speaker 1: theories about plastics is that it has been this underappreciated 292 00:17:19,280 --> 00:17:26,000 Speaker 1: force in um widespread inflation, because plastic packaging goes into 293 00:17:26,320 --> 00:17:29,679 Speaker 1: almost everything, and you know, if if the dial on 294 00:17:29,800 --> 00:17:32,119 Speaker 1: plastics is moving up, like relative to the price of 295 00:17:32,160 --> 00:17:35,320 Speaker 1: the good, it can be quite significant. Is that something 296 00:17:35,480 --> 00:17:37,280 Speaker 1: that you're aware of or that you would like buy 297 00:17:37,320 --> 00:17:40,960 Speaker 1: into it as a commodity strategist. Yeah, I definitely buy 298 00:17:40,960 --> 00:17:43,320 Speaker 1: into that. I think it's all relative. Though, if you're 299 00:17:43,320 --> 00:17:49,280 Speaker 1: talking about a low value product like a bottle of water, right, um, 300 00:17:49,320 --> 00:17:52,000 Speaker 1: you know you're going to see a lot more exactly 301 00:17:52,040 --> 00:17:54,720 Speaker 1: the plastic it was basically yeah, yeah, I mean I 302 00:17:54,720 --> 00:17:56,959 Speaker 1: don't know what the margins look like for selling plastic 303 00:17:56,960 --> 00:18:00,359 Speaker 1: water bottles, but arguably the plastic is a much larger 304 00:18:00,840 --> 00:18:02,800 Speaker 1: input costs there than it would be for let's say 305 00:18:02,840 --> 00:18:07,240 Speaker 1: some sort of healthcare product that's something that maybe cost 306 00:18:07,280 --> 00:18:10,199 Speaker 1: seventy dollars a bottle. Um, you know, the rise in 307 00:18:10,240 --> 00:18:12,480 Speaker 1: plastic price, they could go up you know, a hundred 308 00:18:13,560 --> 00:18:16,040 Speaker 1: and you may not even notice. Um, So I think 309 00:18:16,080 --> 00:18:19,919 Speaker 1: the cost passed through for those low value items is 310 00:18:19,960 --> 00:18:24,520 Speaker 1: probably more likely than something that's more of a premium product. 311 00:18:24,800 --> 00:18:28,200 Speaker 1: So explain. You know, one of the themes that's come 312 00:18:28,320 --> 00:18:31,640 Speaker 1: up in our in the show a lot is this 313 00:18:31,760 --> 00:18:34,960 Speaker 1: idea of like, Okay, we had this pretty dismal growth 314 00:18:34,960 --> 00:18:38,119 Speaker 1: in the wake of the Great Financial Crisis, and many 315 00:18:38,240 --> 00:18:42,679 Speaker 1: areas even going into the pandemic, it's seen under investment, 316 00:18:42,960 --> 00:18:46,000 Speaker 1: under build. But you were saying that in ten there 317 00:18:46,080 --> 00:18:51,159 Speaker 1: was already talk then of um too much capacity, of 318 00:18:51,280 --> 00:18:53,600 Speaker 1: a of So can you talk about what was the 319 00:18:53,680 --> 00:18:58,520 Speaker 1: what were the conditions in such that people were worried 320 00:18:58,560 --> 00:19:02,159 Speaker 1: about over capacity gluts and then like what's now like 321 00:19:02,240 --> 00:19:05,439 Speaker 1: how much? How serious and severe is it for the 322 00:19:05,600 --> 00:19:09,120 Speaker 1: plastics manufacturers, like well, I think it lose pricing power, 323 00:19:09,160 --> 00:19:10,480 Speaker 1: like talk to us a little bit more about the 324 00:19:10,480 --> 00:19:14,400 Speaker 1: economic So so in en, I should say, looking at 325 00:19:14,520 --> 00:19:17,880 Speaker 1: capacity editions, there was a wall of capacity edition both 326 00:19:17,960 --> 00:19:24,040 Speaker 1: polyothlene polypropylene kicking in one and beyond um so mostly 327 00:19:24,119 --> 00:19:26,800 Speaker 1: in Asia, a lot of that in Asia, some in 328 00:19:26,840 --> 00:19:29,040 Speaker 1: the US. We've been building up poly athlene capacity in 329 00:19:29,040 --> 00:19:30,399 Speaker 1: the US for the last few years on the back 330 00:19:30,440 --> 00:19:34,040 Speaker 1: of the shale revolution. But you know, you've seen um 331 00:19:34,200 --> 00:19:40,640 Speaker 1: Asia sort of grinding along at very low margins. Um 332 00:19:40,680 --> 00:19:44,520 Speaker 1: they saw some margin improvement during the COVID period, but 333 00:19:44,920 --> 00:19:48,600 Speaker 1: things are back to sort of uh negative or or 334 00:19:48,800 --> 00:19:53,680 Speaker 1: neutral margin territory right now. And that's that's a symptom 335 00:19:53,920 --> 00:19:57,040 Speaker 1: of the capacity that's coming online there. Uh and the 336 00:19:57,040 --> 00:20:00,159 Speaker 1: fact that China was in lockdown, so you you know, 337 00:20:00,240 --> 00:20:03,119 Speaker 1: in some instances has had China, who's usually a big buyer, 338 00:20:03,680 --> 00:20:05,960 Speaker 1: potentially being a seller of some of the some of 339 00:20:05,960 --> 00:20:10,000 Speaker 1: those commodities. So one thing I've been wondering about is 340 00:20:10,080 --> 00:20:14,520 Speaker 1: if the plastics industry experiences the kind of same existential 341 00:20:14,560 --> 00:20:17,360 Speaker 1: concerns that the oil industry does in terms of investment 342 00:20:17,400 --> 00:20:21,000 Speaker 1: and building out capacity, because I think most countries are 343 00:20:21,240 --> 00:20:23,640 Speaker 1: I should say many countries at this point have said 344 00:20:23,680 --> 00:20:26,720 Speaker 1: that they want to move away from one use plastics. 345 00:20:26,800 --> 00:20:29,720 Speaker 1: And you know, we all know that nerdles aren't very 346 00:20:29,800 --> 00:20:32,879 Speaker 1: could for the environment, and they get in like fish 347 00:20:32,960 --> 00:20:36,119 Speaker 1: lungs and stuff like that. But if there's a stated 348 00:20:36,160 --> 00:20:40,640 Speaker 1: goal to move away from plastic production, does that start 349 00:20:40,680 --> 00:20:43,720 Speaker 1: to impact decisions on whether or not to build out 350 00:20:43,720 --> 00:20:47,199 Speaker 1: refining capacity. Yeah. Absolutely, It's It's been interesting actually over 351 00:20:47,240 --> 00:20:52,520 Speaker 1: the last few over the last few years. The solution 352 00:20:52,640 --> 00:20:58,040 Speaker 1: to oils sort of demand concerns long term was what 353 00:20:58,080 --> 00:21:00,200 Speaker 1: would have focused on the pet count space, so build 354 00:21:00,240 --> 00:21:03,960 Speaker 1: up or pet gun capacity. Obviously that's a big risk 355 00:21:04,160 --> 00:21:10,680 Speaker 1: going forward. You are seeing traction on plastics UM use reduction. 356 00:21:10,760 --> 00:21:13,199 Speaker 1: I think it really depends on what you're reducing the 357 00:21:13,320 --> 00:21:17,760 Speaker 1: use of it. The most obvious cases packaging things that 358 00:21:17,840 --> 00:21:20,880 Speaker 1: you see most visibly floating in the water in all 359 00:21:20,920 --> 00:21:24,440 Speaker 1: these sort of terrible images that you see. UM that 360 00:21:24,760 --> 00:21:26,760 Speaker 1: is sort of the low hanging fruit. I would say 361 00:21:26,880 --> 00:21:29,600 Speaker 1: that the one used plastics UM. You know, what are 362 00:21:29,640 --> 00:21:33,320 Speaker 1: the alternatives? That's the tricky thing. Are you talking about 363 00:21:33,320 --> 00:21:36,520 Speaker 1: going back going back to glass? Uh, going back to 364 00:21:37,280 --> 00:21:42,840 Speaker 1: aluminum UM? You know, oh my god, the worst not no. 365 00:21:42,960 --> 00:21:47,280 Speaker 1: But in all in all seriousness, there's also bioplastics UM. 366 00:21:47,480 --> 00:21:51,400 Speaker 1: So bioplastics you sort of split into two categories. One 367 00:21:51,520 --> 00:21:58,080 Speaker 1: is UM. You're using biomaterial to create a UM sort 368 00:21:58,119 --> 00:22:03,000 Speaker 1: of a lookalike chemical structure for that basically replaces plastic UM. 369 00:22:03,240 --> 00:22:06,480 Speaker 1: Arguably that is not very easy to biodegrade UM. But 370 00:22:06,520 --> 00:22:11,120 Speaker 1: you also have the biodegradable design plastic, which can either 371 00:22:11,520 --> 00:22:16,000 Speaker 1: degrade sort of in normal environment or in a compost 372 00:22:16,080 --> 00:22:19,000 Speaker 1: environment and that maybe has a little bit more traction. 373 00:22:19,000 --> 00:22:21,399 Speaker 1: There's a lot of growth there in that space, but 374 00:22:21,440 --> 00:22:23,760 Speaker 1: it's very small as a percentage of the global market. 375 00:22:23,800 --> 00:22:26,680 Speaker 1: It's you know, I would say one percent or maybe 376 00:22:26,760 --> 00:22:29,600 Speaker 1: less than one percent right now of sort of total plastics. 377 00:22:30,359 --> 00:22:32,080 Speaker 1: This brings me to something else I wanted to ask, 378 00:22:32,119 --> 00:22:35,439 Speaker 1: which is how much of our current plastic supply comes 379 00:22:35,480 --> 00:22:41,720 Speaker 1: from recycled plastic? M That is a good question. Um, 380 00:22:41,760 --> 00:22:44,080 Speaker 1: you know, we don't recycle a lot of plastic, to 381 00:22:44,119 --> 00:22:47,800 Speaker 1: be honest, we there's all sorts of figures out there. 382 00:22:47,960 --> 00:22:50,159 Speaker 1: Most of them seem to sort of center around ten 383 00:22:51,280 --> 00:22:55,760 Speaker 1: plastics recycled. Um. You know, the waste of plastic relative 384 00:22:55,880 --> 00:23:01,440 Speaker 1: to um total use is don't know somewhere around I'm 385 00:23:01,480 --> 00:23:05,359 Speaker 1: just ball parking on an annual basis. Uh so you 386 00:23:05,400 --> 00:23:08,600 Speaker 1: do get like in a market that's uh, you know, 387 00:23:08,640 --> 00:23:13,000 Speaker 1: the total markets probably around four dred and fifty million 388 00:23:13,040 --> 00:23:17,160 Speaker 1: tons or ballpark. Um. You know, the stuff that you're 389 00:23:17,160 --> 00:23:21,080 Speaker 1: recycling is the pet so or the you know, the 390 00:23:21,080 --> 00:23:25,720 Speaker 1: plastic bottles that maybe HDPM and it's a lot harder 391 00:23:25,720 --> 00:23:30,399 Speaker 1: to recycle these uh computer screens or this chair so 392 00:23:30,440 --> 00:23:34,440 Speaker 1: there's there's real barriers to sort of recycling the broader. 393 00:23:34,760 --> 00:23:37,160 Speaker 1: You know, you talk about replacing plastics that the low 394 00:23:37,200 --> 00:23:39,840 Speaker 1: hanging f it is is the stuff that we dispose of. 395 00:23:41,560 --> 00:23:44,520 Speaker 1: I think the hard part about dealing with that is, uh, 396 00:23:44,680 --> 00:23:48,480 Speaker 1: you need to make an environment where it's economic to collect, 397 00:23:49,119 --> 00:23:54,320 Speaker 1: economic to either mechanically or chemically recycled at uh and 398 00:23:54,920 --> 00:23:57,679 Speaker 1: sort of you know, make it, make it more of 399 00:23:58,000 --> 00:24:01,440 Speaker 1: a closed loop environment where where a way a ways 400 00:24:01,480 --> 00:24:04,119 Speaker 1: away from that today and it's going to cost I 401 00:24:04,119 --> 00:24:07,159 Speaker 1: think a lot too to get there. But that's what 402 00:24:07,240 --> 00:24:09,399 Speaker 1: really people need to come to grips with is that, 403 00:24:09,840 --> 00:24:13,760 Speaker 1: you know, Uh, it's gonna come down to diligence from people, 404 00:24:14,080 --> 00:24:16,040 Speaker 1: you know, as we walk out of this room, making 405 00:24:16,080 --> 00:24:19,200 Speaker 1: sure we're putting our plastic cup or in a in 406 00:24:19,280 --> 00:24:25,480 Speaker 1: our recyclable container. Beyond that, it's making sure that the uh, 407 00:24:25,680 --> 00:24:29,159 Speaker 1: you know, the the plastic recycler can actually recycle it. 408 00:24:29,200 --> 00:24:32,520 Speaker 1: So is it like a um, a clear shot there 409 00:24:32,560 --> 00:24:34,199 Speaker 1: or is it going to be something where they're going 410 00:24:34,280 --> 00:24:36,800 Speaker 1: to spend a lot of money sorting it um and 411 00:24:36,800 --> 00:24:39,520 Speaker 1: then ultimately um, you know, at the end of the day, 412 00:24:39,560 --> 00:24:53,760 Speaker 1: they don't break even, you know, just before I just realized, 413 00:24:53,960 --> 00:24:57,640 Speaker 1: what is the sort of when if someone said what's 414 00:24:57,680 --> 00:25:00,719 Speaker 1: the price of plastic? And I get the whole we've 415 00:25:00,760 --> 00:25:02,719 Speaker 1: been talking. There's no one plastic and there's no one 416 00:25:02,800 --> 00:25:05,160 Speaker 1: global price. Is there like a number that you would 417 00:25:05,200 --> 00:25:07,919 Speaker 1: say that's like a rough benchmark that you and the 418 00:25:07,960 --> 00:25:11,800 Speaker 1: industry us. I mean, I typically sort of default to 419 00:25:11,920 --> 00:25:16,280 Speaker 1: like polyethylene price or he density polyethlene or a polypropolene price. 420 00:25:16,280 --> 00:25:18,800 Speaker 1: But like you're talking around a thousand dollars a ton 421 00:25:19,320 --> 00:25:21,560 Speaker 1: and where did it you know, what was that pre 422 00:25:21,680 --> 00:25:23,560 Speaker 1: crisis and where did it get to it its peak? 423 00:25:23,600 --> 00:25:27,199 Speaker 1: In ly? Sure? So again, this this comes down to 424 00:25:27,840 --> 00:25:30,960 Speaker 1: where we are with oil prices, because that's going to 425 00:25:31,080 --> 00:25:36,159 Speaker 1: dictate on the margin what people can actually operate at. 426 00:25:36,200 --> 00:25:40,200 Speaker 1: So they need the end product to sell at a 427 00:25:40,240 --> 00:25:43,000 Speaker 1: certain price to actually keep the margins at a level 428 00:25:43,000 --> 00:25:45,400 Speaker 1: that allows them to operate. So, you know, we've seen 429 00:25:45,440 --> 00:25:50,360 Speaker 1: plastics prices above a thousand uh uh dollars a ton 430 00:25:50,640 --> 00:25:53,600 Speaker 1: for a while. They got up to upboards of two 431 00:25:53,600 --> 00:25:56,520 Speaker 1: thousand dollars a ton um during sort of the chaos 432 00:25:56,640 --> 00:26:00,800 Speaker 1: of of one. Now they're sort of down to those levels. 433 00:26:00,840 --> 00:26:04,240 Speaker 1: Oil prices are obviously a lot higher today. Um well, 434 00:26:04,280 --> 00:26:07,040 Speaker 1: I should say marginally higher today, but they were a 435 00:26:07,080 --> 00:26:10,560 Speaker 1: lot higher earlier this year relative to sort of where 436 00:26:10,560 --> 00:26:14,640 Speaker 1: they weren't history, So this is not really a unseen 437 00:26:14,880 --> 00:26:18,960 Speaker 1: territory to where we are today. UM could I ask you, 438 00:26:19,000 --> 00:26:23,600 Speaker 1: know you touched on China reopening, what impact would you 439 00:26:23,640 --> 00:26:25,840 Speaker 1: expect that to have on the plastics market, because like, 440 00:26:25,920 --> 00:26:29,040 Speaker 1: it feels like it could affect it in various ways. 441 00:26:29,040 --> 00:26:31,720 Speaker 1: So on the one hand, you know, maybe you have, 442 00:26:32,160 --> 00:26:36,199 Speaker 1: um well, exports from China to the US have already 443 00:26:36,240 --> 00:26:38,840 Speaker 1: been falling a little bit, but maybe you have more 444 00:26:39,400 --> 00:26:42,359 Speaker 1: domestic consumption because people are going out and buying things, 445 00:26:42,440 --> 00:26:44,720 Speaker 1: or maybe they're not because they were buying things online 446 00:26:44,760 --> 00:26:47,399 Speaker 1: while they were stuck at home. You could have capacity 447 00:26:47,480 --> 00:26:50,960 Speaker 1: ramped up if more people are out and going to factories. 448 00:26:51,280 --> 00:26:54,120 Speaker 1: How are you sort of parsing that development? I think 449 00:26:54,119 --> 00:26:57,359 Speaker 1: there's there's definitely several moving pieces here. I think the 450 00:26:57,400 --> 00:26:59,879 Speaker 1: one that you touched on, the big sort of elephant 451 00:26:59,920 --> 00:27:03,200 Speaker 1: in the room is the fact that people when they reopen, 452 00:27:03,280 --> 00:27:06,560 Speaker 1: they may not be buying as much online. So you're 453 00:27:06,560 --> 00:27:09,199 Speaker 1: not going to have that sort of support for plastics demand. 454 00:27:09,720 --> 00:27:13,200 Speaker 1: Uh in China. I would expect you know, single use 455 00:27:13,240 --> 00:27:18,760 Speaker 1: plastics eating eating out that type of plastic used to 456 00:27:18,800 --> 00:27:22,600 Speaker 1: go back up. UM. I think there's questions around obviously 457 00:27:22,680 --> 00:27:25,399 Speaker 1: China's real estate market and what construction is going to 458 00:27:25,480 --> 00:27:27,560 Speaker 1: look like going forward. That's going to have an impact 459 00:27:27,600 --> 00:27:31,679 Speaker 1: on your construction plastics like PVC. So you know, you 460 00:27:31,720 --> 00:27:35,639 Speaker 1: may see, UM, even when they reopened, that some of 461 00:27:35,680 --> 00:27:38,359 Speaker 1: this plastics demand isn't what it used to be during 462 00:27:39,160 --> 00:27:42,359 Speaker 1: prior years. So what's your outlook overall? Well, I think 463 00:27:42,760 --> 00:27:45,760 Speaker 1: again it comes back to how much capacity we have 464 00:27:45,800 --> 00:27:49,879 Speaker 1: coming online. We have you know, five to seven of 465 00:27:49,880 --> 00:27:52,800 Speaker 1: of capacity growth in the poly athlete poly propel in space. 466 00:27:53,800 --> 00:27:58,600 Speaker 1: You know, you look, UM, you look at GDP growth 467 00:27:58,600 --> 00:28:01,840 Speaker 1: expectations and obviously they range from anywhere and the low 468 00:28:01,920 --> 00:28:05,360 Speaker 1: ones to maybe two and a half m next year 469 00:28:05,960 --> 00:28:08,600 Speaker 1: real g I think I think that there's definitely room 470 00:28:08,720 --> 00:28:13,440 Speaker 1: for further margin contraction here. Ultimately, you know, margin contraction 471 00:28:13,600 --> 00:28:16,000 Speaker 1: tells you one thing, but you know, oil prices at 472 00:28:16,000 --> 00:28:17,399 Speaker 1: the end of the day will sort of be your 473 00:28:17,440 --> 00:28:20,439 Speaker 1: lower lower bound for some of this stuff. So just 474 00:28:20,560 --> 00:28:23,359 Speaker 1: on that note, this might be a slightly odd question, 475 00:28:23,520 --> 00:28:28,479 Speaker 1: but like given that a lot of plastics comes from oil. Um. 476 00:28:28,600 --> 00:28:32,199 Speaker 1: And given that, like a lot of plastic consumption is 477 00:28:32,280 --> 00:28:35,240 Speaker 1: dependent on economic growth and oil is also sort of 478 00:28:35,240 --> 00:28:38,640 Speaker 1: a play on economic growth, can plastics be like a 479 00:28:38,760 --> 00:28:43,160 Speaker 1: leading indicator for what people are expecting for the overall economy. 480 00:28:43,360 --> 00:28:46,800 Speaker 1: I think so. Um, I would say, you're sort of 481 00:28:47,040 --> 00:28:49,960 Speaker 1: shrouded a little bit now with the capacity that we're 482 00:28:49,960 --> 00:28:53,560 Speaker 1: trying to sort of work through today. But certainly, um, 483 00:28:53,600 --> 00:28:57,040 Speaker 1: you're very sort of high up the value chain with plastics. 484 00:28:57,080 --> 00:29:01,360 Speaker 1: It goes into everything, uh again that we use. So 485 00:29:01,600 --> 00:29:04,080 Speaker 1: you start to see demand for plastics pick up and 486 00:29:04,120 --> 00:29:07,520 Speaker 1: margins there pick up, then ultimately I think that may 487 00:29:07,520 --> 00:29:10,160 Speaker 1: be a nice a nice way to sort of signal hey, 488 00:29:10,200 --> 00:29:13,720 Speaker 1: I turnaround is coming. So definitely worth keeping an eye 489 00:29:13,720 --> 00:29:17,120 Speaker 1: on those margins. I just want to just real quickly, 490 00:29:17,160 --> 00:29:19,240 Speaker 1: you know, go but we talked to you mentioned it, 491 00:29:19,720 --> 00:29:22,480 Speaker 1: you know, the concerns about single use plastics, the images 492 00:29:22,520 --> 00:29:27,480 Speaker 1: of huge plastic blobs in the sea. Um, how much 493 00:29:27,560 --> 00:29:29,680 Speaker 1: teeth you know when you look at what governments around 494 00:29:29,680 --> 00:29:33,080 Speaker 1: the world are attempting to do on this, how significant 495 00:29:33,280 --> 00:29:35,360 Speaker 1: is it? Is it a lot of press releases that 496 00:29:35,400 --> 00:29:38,800 Speaker 1: won't really amount too much and or are there some 497 00:29:38,880 --> 00:29:41,560 Speaker 1: real curves and in terms of you know, when you 498 00:29:41,600 --> 00:29:44,520 Speaker 1: think about I don't know the medium term growth of 499 00:29:44,560 --> 00:29:48,040 Speaker 1: the industry, are some of these environmental E s G 500 00:29:48,240 --> 00:29:51,440 Speaker 1: concerns going to curtail it in a meaningful way. I 501 00:29:51,760 --> 00:29:53,800 Speaker 1: think that there is room you sort of extend the 502 00:29:53,840 --> 00:29:56,520 Speaker 1: timeline out long enough and there will be room for 503 00:29:56,600 --> 00:30:00,840 Speaker 1: some meaningful reductions. That the issue when look at what 504 00:30:00,960 --> 00:30:04,680 Speaker 1: drives plastics demand, it's obviously I think population growth is one, 505 00:30:04,720 --> 00:30:07,840 Speaker 1: but also income per capita is one. UM. You know, 506 00:30:07,880 --> 00:30:11,520 Speaker 1: over the last fifty years, uh, the plastic industry is 507 00:30:11,520 --> 00:30:14,400 Speaker 1: sort of like found its way into sort of every 508 00:30:14,520 --> 00:30:17,960 Speaker 1: nook and cranny of everyday life. But now plastics demand 509 00:30:18,000 --> 00:30:22,440 Speaker 1: sort of grows it GDP because you know, there's no 510 00:30:22,480 --> 00:30:26,040 Speaker 1: more like there's I get filled every nooks and crannies 511 00:30:26,080 --> 00:30:28,840 Speaker 1: that are out there everywhere, right, And so to the 512 00:30:28,880 --> 00:30:33,120 Speaker 1: extent that um, you know, getting rid of plastics, you 513 00:30:33,120 --> 00:30:34,840 Speaker 1: have to ask, how do we get here in the 514 00:30:34,840 --> 00:30:37,400 Speaker 1: first place. Part of it is because they're you know, 515 00:30:37,520 --> 00:30:43,680 Speaker 1: incredibly dynamic materials UM and they're usually fairly low cost, 516 00:30:44,160 --> 00:30:46,520 Speaker 1: and so you have to sort of get around that 517 00:30:46,600 --> 00:30:51,240 Speaker 1: to to um uh make to make in roads for 518 00:30:51,240 --> 00:30:54,440 Speaker 1: for either replacement or just reduction of use in general. 519 00:30:54,520 --> 00:30:56,720 Speaker 1: But you know, I guess the other thing that I 520 00:30:56,800 --> 00:30:59,280 Speaker 1: point out is that it comes also down to UM 521 00:30:59,480 --> 00:31:03,360 Speaker 1: human beho of your and our ability to UM. You know, 522 00:31:03,400 --> 00:31:05,040 Speaker 1: if you want to make this a closed loop or 523 00:31:05,200 --> 00:31:07,240 Speaker 1: closer to a closed loop, we need to we need 524 00:31:07,320 --> 00:31:10,080 Speaker 1: to do our part to actually spend the time recycling, 525 00:31:10,440 --> 00:31:13,000 Speaker 1: and we need to build out the recycling capacity and 526 00:31:13,320 --> 00:31:15,560 Speaker 1: all sorts of other things down the supply chain to 527 00:31:15,800 --> 00:31:18,400 Speaker 1: make that work. I have one last question, and it's 528 00:31:18,480 --> 00:31:22,120 Speaker 1: for like my own future educational efforts to learn more 529 00:31:22,120 --> 00:31:25,480 Speaker 1: about plastics. You know, when I think about oil, I 530 00:31:25,600 --> 00:31:27,720 Speaker 1: have like a handful of companies in my mind. I 531 00:31:27,800 --> 00:31:31,320 Speaker 1: understand there's like the big mega oil companies and the 532 00:31:31,320 --> 00:31:35,400 Speaker 1: pipeline providers, upstream downstream drillers all that, who are like 533 00:31:35,560 --> 00:31:39,200 Speaker 1: what is the ecosystem with what is the equivalent ecosystem 534 00:31:39,200 --> 00:31:42,120 Speaker 1: when we're talking about plastics, and like who would be company? 535 00:31:42,240 --> 00:31:44,720 Speaker 1: Like whose conference calls? Should I read? Start reading to 536 00:31:44,760 --> 00:31:47,400 Speaker 1: start learning more? Now it's a good question. UM. I 537 00:31:47,440 --> 00:31:52,080 Speaker 1: would first say that the space, uh, depending on where 538 00:31:52,080 --> 00:31:54,600 Speaker 1: you're looking, is heavily integrated with refining. So some of 539 00:31:54,600 --> 00:31:57,320 Speaker 1: the refineries that you may be reading the transcripts on 540 00:31:57,720 --> 00:32:01,360 Speaker 1: are also the ones that are produced seeing the plastic um. 541 00:32:01,400 --> 00:32:03,600 Speaker 1: I think there's a lot of and I don't know 542 00:32:03,640 --> 00:32:06,280 Speaker 1: if I should name names here, but large chemical companies, 543 00:32:06,600 --> 00:32:09,719 Speaker 1: um you know you name them, uh like a du 544 00:32:09,800 --> 00:32:13,880 Speaker 1: Pont or something. Is that ad knock? I mean when 545 00:32:13,920 --> 00:32:15,760 Speaker 1: I was an Abu Dhabi, ad Not made its big 546 00:32:15,800 --> 00:32:18,360 Speaker 1: move into petro chemicals for exactly the reasons we've been 547 00:32:18,360 --> 00:32:22,000 Speaker 1: talking about. And then are there separate companies that then 548 00:32:22,120 --> 00:32:25,200 Speaker 1: like take some sort of like raw like specialize in 549 00:32:25,200 --> 00:32:29,080 Speaker 1: the molding, like the molding of a specific plastic into 550 00:32:29,120 --> 00:32:30,920 Speaker 1: like a like yeah, I don't know, like what's the 551 00:32:30,960 --> 00:32:34,360 Speaker 1: next that's sure to exactly you're taking the buyer of 552 00:32:34,360 --> 00:32:38,680 Speaker 1: those pellets, who's then uh making a bottle or or 553 00:32:38,720 --> 00:32:41,520 Speaker 1: a clamshell or sort of you name it. That that's 554 00:32:41,560 --> 00:32:45,280 Speaker 1: I think a little less integrated than the upstream, right. Uh. 555 00:32:45,680 --> 00:32:49,600 Speaker 1: There are plenty of companies out there that that sort 556 00:32:49,600 --> 00:32:51,480 Speaker 1: of sitting in that bucket, but that are sort of 557 00:32:51,520 --> 00:32:55,600 Speaker 1: plastics or packaging specialists. Right. All right, well, Warren, thank 558 00:32:55,640 --> 00:32:58,880 Speaker 1: you so much for for kicking off our education on plastics. 559 00:32:58,920 --> 00:33:00,840 Speaker 1: I'm sure there's going to be more to come, but 560 00:33:01,000 --> 00:33:03,000 Speaker 1: I really appreciate that. That was great. Thank you for 561 00:33:03,040 --> 00:33:17,880 Speaker 1: your time. Thank you so much, Joe. I think I 562 00:33:17,920 --> 00:33:20,960 Speaker 1: have a new ambition in life. I want to build 563 00:33:21,080 --> 00:33:24,800 Speaker 1: a nerdle pipeline. You can make a fortune. It's like 564 00:33:25,040 --> 00:33:29,200 Speaker 1: a nerdle pipeline from you know, I don't know where's 565 00:33:29,240 --> 00:33:32,840 Speaker 1: the in which direction, Where's how do you take advantage 566 00:33:32,840 --> 00:33:34,560 Speaker 1: of it? You know, since I'm dreaming big, I'm just 567 00:33:34,560 --> 00:33:38,760 Speaker 1: going to say around the world, the world, It'll go everywhere. Now. 568 00:33:38,800 --> 00:33:41,160 Speaker 1: But I thought that was a fascinating conversation, and I do. 569 00:33:41,320 --> 00:33:43,040 Speaker 1: I do think that this might end up being an 570 00:33:43,080 --> 00:33:48,440 Speaker 1: unappreciated aspect of consumer goods inflation overall, and also just 571 00:33:48,480 --> 00:33:51,080 Speaker 1: the idea of looking at the plastics market as sort 572 00:33:51,120 --> 00:33:55,000 Speaker 1: of an early read potentially on the economy and economic growth. 573 00:33:55,040 --> 00:33:57,120 Speaker 1: That seems interesting too. Yeah, I mean, there were a 574 00:33:57,120 --> 00:33:59,800 Speaker 1: bunch of interesting things, you know. I do think, like 575 00:34:00,040 --> 00:34:03,840 Speaker 1: you know, the disruption of that Texas freezers underappreciated. When 576 00:34:03,840 --> 00:34:08,040 Speaker 1: we talked about a literal storm contributing to the perfect 577 00:34:08,040 --> 00:34:11,840 Speaker 1: story perfect storm, perfect storm created a perfect storm. It 578 00:34:11,960 --> 00:34:15,120 Speaker 1: was a perfect storm that contributed to the broader perfect storm, 579 00:34:15,120 --> 00:34:18,160 Speaker 1: and so how long that took to fade, and then 580 00:34:18,200 --> 00:34:20,640 Speaker 1: just this idea that like, Okay, you know, we might 581 00:34:20,680 --> 00:34:23,319 Speaker 1: be in this situation where there's a lot more capacity 582 00:34:23,320 --> 00:34:26,120 Speaker 1: coming online than the growth, so it's sort of like 583 00:34:26,400 --> 00:34:29,640 Speaker 1: this this wall of plastic capacity is kind of an 584 00:34:29,719 --> 00:34:33,160 Speaker 1: interesting theme. And again, whether that inflation turns turns to 585 00:34:33,200 --> 00:34:36,360 Speaker 1: disinflation over the course of well, that kind of gets 586 00:34:36,360 --> 00:34:39,880 Speaker 1: back to the like existential questions facing the energy industry 587 00:34:39,880 --> 00:34:42,160 Speaker 1: as well, which we've been discussing on the podcast, because 588 00:34:42,200 --> 00:34:47,319 Speaker 1: a lot of oil producers went into petrical petrochemical refining 589 00:34:47,600 --> 00:34:50,560 Speaker 1: in order to sort of diversify away from just drilling 590 00:34:50,600 --> 00:34:53,360 Speaker 1: and pulling hydrocarbons out of the ground. But if everyone 591 00:34:53,440 --> 00:34:55,960 Speaker 1: does that at the same time, is it actually going 592 00:34:55,960 --> 00:34:58,759 Speaker 1: to be profitable or work. The other thing that I 593 00:34:58,800 --> 00:35:01,560 Speaker 1: thought was interesting was, you know, the talk about recycling, 594 00:35:01,640 --> 00:35:04,160 Speaker 1: and I think it was in October that we had 595 00:35:04,280 --> 00:35:07,719 Speaker 1: Green Peace basically come out and say that plastics recycling 596 00:35:07,880 --> 00:35:11,359 Speaker 1: doesn't work and we need to find another solution. I'm 597 00:35:11,640 --> 00:35:15,520 Speaker 1: I'm a recycling skeptic. That's fair. I should I should 598 00:35:15,560 --> 00:35:18,480 Speaker 1: point out that the plastic cups featured in this episode 599 00:35:18,640 --> 00:35:21,880 Speaker 1: are in fact recyclable, whether or not anyone is actually 600 00:35:21,960 --> 00:35:25,239 Speaker 1: making money recycling them and reusing them. Is it is 601 00:35:25,280 --> 00:35:27,920 Speaker 1: an open question? All right? Shall we leave it there? 602 00:35:28,000 --> 00:35:30,800 Speaker 1: Let's leave it there? Okay, this has been another episode 603 00:35:30,840 --> 00:35:33,239 Speaker 1: of the All Thoughts podcast. I'm Tracy Alloway. You can 604 00:35:33,239 --> 00:35:35,719 Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe 605 00:35:35,719 --> 00:35:38,000 Speaker 1: wi Isn't Though. You can follow me on Twitter at 606 00:35:38,040 --> 00:35:41,920 Speaker 1: the Stalwart. Follow our producers on Twitter Carmen Rodriguez at 607 00:35:42,000 --> 00:35:45,840 Speaker 1: Kerman Arman and Dash Bennett at Dashbot. Follow all of 608 00:35:45,880 --> 00:35:49,239 Speaker 1: the podcast is Bloomberg unto the handle at podcasts, and 609 00:35:50,160 --> 00:35:52,520 Speaker 1: for more odd Lots content, go to Bloomberg dot com 610 00:35:52,560 --> 00:35:55,880 Speaker 1: slash odd Lots, where we post transcripts of each episode 611 00:35:56,120 --> 00:35:58,840 Speaker 1: Tracing I Blog. We have a newsletter that we write 612 00:35:58,840 --> 00:36:02,120 Speaker 1: each week. Every Friday comes out. Subscribe to it. Thanks 613 00:36:02,160 --> 00:36:02,640 Speaker 1: for listening.