The resin raw material market has experienced a general weakening in recent times, while the UPR market remains stable. Key resin types such as Orthophthalic general-purpose resin (50), double ring (DC) hand lay-up resin (10), artificial stone/quartz stone resin (60), pultrusion resin (70), winding structure layer resin (90), winding isophthalic lining resin (110), NPG molding resin (90), and DPG molding resin (250) are all impacted by these market trends.

Factors Influencing the UPR Market

This week, the raw material market continues to exhibit weakness. The driving factors are twofold:

  1. Weak downstream demand persists.
  2. An expected increase in upstream production capacity is causing apprehension in the market.

Moreover, the latest official PMI index has dropped to its lowest point since February 2020, signaling mounting economic pressures. Additionally, the spread of the pandemic, triggered by the Nanjing Lukou Airport outbreak, is leading to intensified control measures across the country. The resulting impact on production and operations is gradually becoming evident.

Downstream Challenges for UPR Factories

According to reports from UPR factories, the outlook for August orders is not promising. The expected values across all companies are lower than those of July. Despite a significant year-on-year increase in sales and pricing in the first half of the year, profits have sharply declined by over 60%. This drastic drop indicates the severe challenges that the UPR industry currently faces, demanding serious attention from the UPR upstream industry.

Concerns Over Short-Term Gains and Supply Chain Stability

If the upstream industry continues to prioritize short-term gains without considering the long-term health and stability of the entire supply chain, the collapse of raw material markets may soon become a reality. In particular, this year has seen an irrational surge in raw material prices, leading to substantial resistance from UPR factories. Many factories now favor new suppliers as a way to express their dissatisfaction with some traditional upstream manufacturers.

Impact of New Capacity on UPR Factories

The subsequent entry of new production capacity is seen as a positive development for UPR factories. They generally welcome these changes as a means to speed up production and mitigate reliance on previous suppliers. The pace of new capacity entering the market is accelerating, breaking traditional conventions.

Due to the ongoing pandemic, the unsaturated resin development forum, initially scheduled for August 12 in Changzhou, Jiangsu Province, has been postponed. Further details will be announced later.

Insights on Managing UPR Price Fluctuations

Many of UPR’s downstream customers are connected to export or engineering markets. These customers often prefer to lock in the total UPR quantities and prices when they receive export or engineering orders. However, the UPR industry lacks control over upstream markets, meaning price adjustments must follow shifts in the prices of upstream raw materials. This creates friction between UPR factories and downstream users.

Strategy for Price Adjustment

To avoid such conflicts, some companies have found a solution: binding UPR production plants closely with their downstream customers. By sharing both the risks and benefits, neither party blames the other. One effective method is to sign a price adjustment clause when agreeing on the total volume contract. The price adjustment is based on changes in the Resin Price Index, where both parties share 50% of the price changes. This is calculated weekly, with the final price being the execution price on the shipping date.

This practice has proven to be a fair and predictable method of addressing price fluctuations, ensuring smoother operations without constant renegotiations over prices. This experience serves as a valuable reference for UPR factories.