Does anyone know about thermoplastic injection molding parts?

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March 10, 2022

by a searcher from Universidad Rey Juan Carlos in Madrid, Spain

Anyone around here who has had experience with a company that works with thermoplastics or injection molding?
I'm concerned about the impact that rising oil prices may have on the costs of plastic resins and the main raw materials the company uses

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Reply by a searcher
from Lehigh University in New York, NY, USA
Rodrigo - I have some experience in blown film and thermoforming which have similar exposure to resin prices. As Walker Chris mention there are typically pass through mechanisms built in to customer contracts. You'll want to review your supplier contracts as well. These are typically indexed but the base can always be renegotiated or you can find a new supplier. Make sure you have disaster clauses built in as well. That will allow you to instantly pass through price if resin changes X% over a certain period due to a Texas freeze or natuarl disaster that disrupts supply.

Products and end markets are relevant as you underwrite, work through diligence and review supplier and customer contracts. As Christopher mentioned, medical customers often spec in specific resins making it very difficult to swap them out to save costs later on. But given the long approval cycles in medical and pharma you typically have more pricing power. It's not worth the OEM taking a year to approve a new supplier if a small plastic component is going from 5 cents to 10 cents on a finished product that can cost hundreds or thousands. FDA / food applications might allow for "like kind" resins upon approval or notice, and industrial or commercial applications are typically a free for all.

Hope this helps.
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Reply by a searcher
from University of Ljubljana in Slovenia
Hi Rodrigo. Some leading producers of rigid injection moulded plastic packaging parts in Europe link the material part of the price to the Platts Index (S&P Global). In this way the risks of material share change in part's price is addressed fairly. Such agreement is especially common for long-term relationships where the deal size is bigger, clients are more experienced in sourcing and the number of clients buying certain part is limited. The Platts Index data is relatively expensive, but representative enough (at least for olefins; probably also other petrochemicals). As a cheaper alternative to it you may perhaps consider indices published by some specialized German plastic magazines. In the plastic packaging industry the price change as a response to material price change is typically not so difficult to pass on to clients. A much bigger challenge is availability of specific material, as already ^redacted‌ mentioned.
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