Rising Raw Material Costs

Raw materials of disposable IV sets

The IV set consists of the plastic spike, drip chamber, roller clamp, injection site, Luer connector, hypodermic needle, cap, tubing, etc. The raw materials used to produce these parts increase, and the price of the IV set increases. We produce several kinds of IV sets in our factory. You can click here to see more information.

Acrylonitrile butadiene styrene (ABS)

There are two kinds of ABS used in our products:

(1) transparent ABS

(2) regular ABS

Transparent ABS is more expensive than regular ABS. The Luer lock connector is made of transparent ABS, while the plastic spike is made up of regular ABS. This substance provides impact resistance, toughness, and rigidity required of, and needed by, the plastic IV spikes of our products. 

Polyvinyl chloride (PVC) 

PVC is another raw material that composes our infusion lines. Specifically, the IV drip chambers and the infusion tubes of our IV intravenous sets are made up of this substance. In addition, the PVC provides flexibility to our product parts.

Polyethylene (PE) 

PE(HDPE) is the substance from which the roller clamps of our infusion systems are made up, although ABS can also be used. PE provides the roller clamps of our infusion lines to resist plastic deformation at a lower cost.

Polypropylene (PP)

This substance, PP, provides high resistance to plastic fatigue. Thus, the plastic part of our hypodermic needle has high resistance to breakages. 

Market drivers of price increases

Signing of the “American Recovery Plan Act”

President Joe Biden of the US recently signed into law the so-called “American Recovery Plan Act,” aiming to help Americans adversely affected by the COVID-19 pandemic. This is an economic relief law wherein. Among other things, one-off direct payments worth US$1,400 will be sent to most Americans, in addition to the weekly jobless benefit payments of US$300 until September of this year.

Unfortunately, although this move will surely help most Americans, it is an inflationary expenditure that pushed up all US dollar-denominated asset prices, which means people all over the world have to pay for it.

Coronavirus pandemic 

Aside from the blockage of the Suez Canal, the coronavirus pandemic significantly disrupted the supply chains of raw products. This reduced the supply, ultimately leading in, and inevitably to, the increase in the costs of raw materials. 

Panic buying

In the first half of 2021, there was a good demand for raw products caused and fuelled by the coronavirus pandemic and the emerging supply shortage. Sensing increasing demand for the raw products, buyers secured more volumes, inducing panic buying and then amplifying the shortages further.

Price changes (from 2020 to 2021)

Acrylonitrile butadiene styrene (ABS)

In April 2021, buyers of ABS had to suffer from absorbing a significant price increase of around EUR 300 per metric ton due to the Suez Canal blockage. This increase pushed the ABS prices to over EUR 3,000 per metric ton.

These do not deviate much from the figures in Hong Kong wherein the price trend report of plastic resins in May 2021 were the following: the ABS costs USD 2550-2650/ton, while the transparent ABS costs USD 3350-3450/ton. 

Polyvinyl chloride (PVC)

In the first quarter of 2021, there was a tense situation in PVC production. Many PVC-producing lines have resumed operating; however, others failed to start. Rising costs for the matrix material and additive components were noted. All of these drove the prices of the compounds to a higher level. The prices of paste were also reported to have increased. It is projected that the high price level will continue. In addition, it is becoming clear that in the coming months, the same scenario will be observed: rising costs combined with strong demand and inadequate availability. 

The Bloomberg report dated March 18, 2021, titled “Plastic Prices Hit Record High to Stoke Inflation Concerns,” revealed that more than 60% of the US PVC manufacturers were still offline.

The drastic reduction in the production of PVC goods hiked up the price of the commodity to US$1625/ton, almost double compared to last year’s price. Although this price increase applies to regular PVC, the trend is also applicable to medical PVC, which is used in our disposable intravenous systems.    

Polypropylene (PP)

In 2019, the global price of polypropylene was approximately 1,064 US dollars per ton. Compared to the price in 2018, the price in 2019 was lower by 14 percent. Based on recent projections, however, the price of PP in 2021 will increase to 1,315 US dollars per ton. Worse, this projection was made before the outbreak of the COVID-19 pandemic. With the pandemic still going on and wreaking havoc on most industries all around the world, the price of PP in 2021 could still go up, possibly higher than 1,315 US dollars per ton. 

The predicted price trend for PP in the above agreed with the figures reported in Hong Kong. Based on the price trend of resins in May 2021, the cost of transparent PP was USD 1650-1750/ton, upped by 9.4% compared with its price of USD 1600/ton in December 2020. 

Polyethylene (PE) 

In the first quarter of 2021, there was a continuing shortage of PE in Europe. In March 2021, the cost of PE increased by EUR 75/ton. Worse, even before this new price was implemented, some producers announced an increase of EUR 200-250/ton.

Based on the price trend report in Hong Kong, the following were the costs in May 2021: HDPE = USD1260-1320/ton; LDPE=USD1600-1680/ton. 

When will the price of raw materials fall?

Our underlying assumption

1. Before the end of the pandemic, there will be no turning point

As the United States prints $1.9tn money, this will lead to an overall increase in the global prices of oil, commodities, international trade, logistics, and transportation denominated in dollars.

2. After the pandemic is over, the high prices will still last for a long time

After the epidemic is brought under control, production capacity in Europe, the United States, and the world will be restored. However, at this time, the shortage of raw materials will intensify, and the relationship between supply and demand will continue to be unbalanced.

Repercussions of the rising prices of raw materials

The increasing prices of raw materials do not stop here. Indeed, they will have aftereffects on the companies that will make use of them. Specifically, medical device companies that produce infusion systems will be adversely affected because their products need the raw materials discussed here: PE, PVC, ABS, and PP. For these companies to maintain their viability, they do not have other recourse but to increase the prices of their finished products.