Strategies for Customers in the Plastic Pellet Industry

RAILCARS IN THE PLASTIC PELLET MARKET

One of the primary outputs of the US chemicals industry is plastics and plastic resins.

Plastics are found throughout the manufacturing and consumer goods industries, commonly as component parts and packaging materials. Before being molded into its final shape, plastics are made and stored as bead-sized pellets. The pellets are transported in the “large” and “jumbo” sizes of covered hoppers, typically 5,800 – 6,500 cubic feet in size, with specialized pneumatic outlets used to unload the railcar.

The ubiquity of plastics throughout the economy leaves demand closely correlated with overall economic output, with the last decade experiencing steady demand. In anticipation of an economic slowdown, demand for plastic pellet capable covered hoppers waned in the second half of 2022. However, due to two key advantages unique to the plastic pellet market, this downward trend is not expected to be a sharp decline.

The first comes from competitive US crude oil pricing. As a petrochemical, plastic is made from petroleum. While elevated crude prices worldwide have made plastics’ feedstock more expensive, costs remain lower than in Europe or Asia, which experience higher energy costs. In turn, the domestic plastics market enjoys a competitive advantage in the cost of its inputs.

The second advantage comes from the scarcity of cars with the unique design capable of carrying plastic pellets. Such cars are larger than most covered hoppers, generally between 5,800 and 6,000 cu ft, with a specialized pneumatic outlet to control how pellets exit the railcar. Car design improvements have led to a steady adoption of larger 6,200 cu ft cars, which move more pellets more efficiently. Thus, plastic pellet car demand is relatively stable compared to other specialized railcars in use.

At AITX, we see the plastic pellet demand remaining strong for the foreseeable future. That is why we remain focused on assisting our customers in the transition from the 5,800 cu ft size to the more efficient 6,200 cu ft cars. The long-term predictability of the plastics industry allows us to confidently invest to better serve existing customers and remain a strong choice for our future partners.