The Iran war and pipe prices

Just 11 days into the Iran war, Jamie hosts an in-depth discussion with two experts in the polyethylene market. Joining the conversation are Sleiman Bassila, founder and president of BIC Advisory Group, and Tom Hughes, founder, president, and CEO of Quantum Polymers.

With a combined 45 years in the industry, Sleiman and Tom contextualize current events with a brief history of the polyethylene resin market. They discuss the current situation, compare it with the 2021 freeze caused by Winter Storm Uri, cover the significance of the shipping shutdown at the Strait of Hormuz, and share their thoughts on potential short- and long-term challenges ahead for producers and consumers.

Chapters:

00:00 - Introduction
02:45 - Defining terms 
03:43 - A brief history of the polyethylene market
11:04 - Winter Storm Uri and the 2021 freeze
15:05 - A chokepoint on global energy
19:02 - Cascading implications
22:44 - A dangerous situation
24:49 - Global events and impacts at home
28:13 - The importance of shipping routes
29:23 - Seeing the big economic picture
31:46 - Ongoing market volatility
33:44 - Understanding the scope of the crisis
35:00 - Higher prices, large volume buyers
38:45 - Short- and long-term effects
41:44 - Potential outcomes for the global economy
44:32 - Final thoughts

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Transcript

Sleiman Bassila (00:00):

And then, of course, war happens. War happens 11 days ago. Okay.

Tom Hughes (00:05):

Last week, our customers, their customers, didn't quite understand the level of seriousness that this really is.

Sleiman Bassila (00:13):

It's not a linear reaction. It's exponential.

Tom Hughes (00:17):

This is one of those major events that is probably going to shift the industry and supply.

Jamie (00:27):

Welcome to The Water Table podcast. Today is March 10, 2026. And I want to mention that date because we'll be releasing this podcast on March 13, Friday, Friday the 13th, actually. But this is a really good podcast that we have. And I have never done this before where I state the date, but I am today because of the topic. The topic is what's happening in our global markets with polyethylene and the volatility.

(00:58):

And we know one thing to be certain in all of this is that it won't be the same on Friday when this is released from today when we record it, as it is that volatile. But the information we're going to provide is really timely and really good. And the guests that I have, I'm excited to introduce to you now. I have Tom Hughes from Quantum Polymers joining me, along with Sleiman Bassila. And I want to just introduce them to you, and I'm going to start with Sleiman. He is the founder and president of the BCI Advisory Group, a consultancy dedicated exclusively to the polyethylene markets.

(01:38):

The firm helps buyers, distributors, and traders reduce resin costs, anticipate market shifts, and negotiate with greater confidence by translating market fundamentals into actionable commercial strategies. Before founding BIC Advisory Group, Sleiman spent more than 25 years with ExxonMobil in a series of senior leadership positions, spanning manufacturing, supply chain, commercial, strategy, global business development, and executive management. He most recently served as the vice president of ExxonMobil's Chemical Canada, where he was responsible for chemicals and plastic business, generating one billion in annual revenue.

(02:23):

Also with me today is Tom Hughes. Tom is the president and CEO of Quantum Polymers, has been doing this for a long time in the industry. I've known Tom for around 30 years, and him and his company have helped Prinsco along the way many different years and many different times. So thank you both for joining me. Also want to just state a few of the things you're going to hear today are around some terms like feedstock, cracking. It is some of the terms used in this industry. The feedstocks are different than how we talk about that in agriculture.

(03:05):

It's really the materials that are used to make the polyethylene product out of the chemicals and out of the energy process. So a lot of the feedstocks you're going to hear is a new concept that we're forgetting about when we're taking all of this into our thought process about what's happening in the Middle East as not only is resin and plastic coming out of the Middle East, but much of the feedstock that they can use to make it in other areas of the world is coming out of there also. So welcome, Tom and Sleiman.

Sleiman Bassila (03:43):

Jamie, thank you for inviting me to the podcast. It's a great opportunity to be with you today, maybe to shed some light for market participants in terms of what's happening out there in polyethylene markets. And of course, this is just a small part of what's happening overall in the global energy markets and geopolitics, et cetera. So we'll focus on polyethylene today for the benefit of time here. Before we get kind of into where we are today, if I may, can I go back maybe 15 years? Okay. And again, won't be long-winded, but just to describe to you, because everything doesn't happen in a vacuum. We're kind of the result of history, and where we got to today is important as well, and how we got here.

(04:35):

So really, when I look back over the last 30 years, the one big event in the industry is really a technology breakthrough in terms of how to extract gas from shale formations in the US, mostly, right. So once that technology breakthrough happened, it really was really more to extract more gas and more oil than to worry about polyethylene. But the net benefit there is, all of a sudden, now US producers had access to very cheap feedstock, ethane feedstock in the US. So they went on a series of investments. They realized that this is here to stay, this difference in terms of how much it'll cost them to make it here versus what the rest of the world is paying for it. And therefore, they went through a series of investments back in the 2010s.

(05:34):

So I was involved in that very early on, on a couple of big projects in the US Gulf Coast. Other competitors outside came in and invested, invested in a lot of capacity. So if you can think about the 2010s early as the technology breakthrough in the 2015 to 2018, '19, you started seeing that capacity come on. Okay. More availability of polyethylene in the marketplace. And if you look straight at kind of what the market... how the market reacted to that in terms of prices, you started seeing in 2018 and 2019, and Tom lived that kind of day by day in erosion of price. Prices were coming down in 2019, showing all this oversupply or this excess capacity. And then, of course, nothing kind of stays the same in the world or in polyethylene.

(06:27):

And COVID hit in 2020. If you remember March of 2020, COVID hit, demand kind of went to zero overnight, almost, lockdowns, everything. And then prices kind of dipped even further down and maybe bottomed below 40 cents per pound, call it in March, April of that 2020 year, right. And then lockdowns were lifted, of course. And then recovery. And Jamie, I'm sure you've seen in your business recovery of demand are coming out of COVID, and therefore recovery of polyethylene prices. And they were recovering, actually, pretty nicely later in 2020 into 2021. And then, of course, the big one hit, the Texas freeze storm, Winter Storm Uri, if you remember, February of 2021.

Tom Hughes (07:19):

'21, yeah.

Sleiman Bassila (07:21):

Right. It was like an earthquake because what this one did, and this is, I'm going to draw some parallels, Jamie, between it and/or how we're living through today's crisis, right. Hit all of a sudden, shut down all the polyethylene, polypropylene, other crackers in the US, of course, and overnight, you had no supply, and you're scrambling for resin. Kind of what we're living in this week, last week, scrambling a little bit for resin because there wasn't enough of it. And of course, prices followed in a big, big way.

(07:54):

And they started climbing. And what was interesting as I was looking at this over the weekend is they only topped... reached a peak six, seven months later. So it wasn't kind of an immediate prices hit the roof, but because those shortages resolved very slowly, prices kept going up and up and up and reached 90 cents and close to a dollar a pound at one point later in that year, right. So that wasn't great times for if you were a buyer. It was fantastic time if you were a seller.

Tom Hughes (08:31):

And I think that started to move back down, Sleiman, I think, roughly around... almost about a full year. I think around like March of '22-

Sleiman Bassila (08:39):

'22.

Tom Hughes (08:40):

... is where we started kind of hit that February, March peak, and then we-

Sleiman Bassila (08:43):

Yes.

Tom Hughes (08:43):

... started to drip back down.

Sleiman Bassila (08:44):

Drip back down. And rip back down because, now, the second wave of investments started also showing up. You think about what came online over the last two, three years, more capacity and therefore pressure on prices, more competition out there. And that was the case in '23, '24, '25. And this last quarter in '25 was really especially bad for the resin producers. If you look at their earnings, almost all of them lost money in Q4, just in Q4 2025, because prices were softening too much.

(09:19):

Again, dipping below 40 cents per pound is a bit of a magic floor where things go bad for production if you get below 40 cents per pound. And really, the prospects, and we've had many discussions on this one with my clients and Tom in the past, where... in the past couple of months, where really the prospects were for this overcapacity to overhang the market and be a damper on prices going forward. For how long? Well, for the next two, three, four years. It wasn't going to resolve anytime soon. It was like a albatross hanging over a supply because the rest of the world was also still investing in polyethylene capacity, right, China, other places.

(10:06):

So this wasn't... this was setting up to be a really bad time for oversupply and good time to be buyer, actually, lower prices. And then, of course, war happens. War happens 11 days ago. Over the Saturday morning, I guess, we wake up and see that the world is upside down and bombs are flying, and the whole energy market is disrupted. And so this is how we got here. I don't know if you have any kind of thoughts or questions on the past. And the next phase we can cover kind of where we are today, and what the prospect of this going forward in terms of recovery.

Tom Hughes (10:53):

And I noticed when you said 11 days ago that the look on Tom's face was, it feels like a lot longer than that.

Sleiman Bassila (11:00):

Yes. Yes.

Tom Hughes (11:00):

It's been a very active, very active.

Jamie (11:04):

Yeah. So that's a really good summary of the past. And I think this isn't really a question, more of a comment, but it'll get us to the next part is I think part of it for what I'm seeing in our side of the business, and we purchase the product from companies like Tom's and then manufacture it and sell it to the end users a lot or to the guy that's installing it. And for, even though it's not that long ago from the 2021 freeze, since the prices came down, they've been very steady, and there's been no price changes either up or down, really.

(11:42):

So it does feel different this time from the standpoint of it isn't quite... it's like people aren't getting it a little bit, including myself, when this first happened. I never would've thought that we would be comparing this to 2021. I thought that was a once-in-my-career event that was going to happen. And I guess we don't know yet, is this going to be as bad as 2021? But just the fact that we're only 11 days in and we're starting to say, is it even possible that this could be the same type of scenario is enough, I think, to have a podcast and talk about-

Tom Hughes (12:20):

[inaudible 00:12:20].

Jamie (12:20):

... it so that our customers and we can start to realize what we have to prepare for.

Sleiman Bassila (12:26):

Perfect. Perfect. Yes. So that's exactly what I did. Like you, Jamie, I think, and Tom, the first reaction is a bit of a shock because you see what's happening in the news, and then you see reaction to it in the energy market, oil, gas, naphtha feedstock, polyethylene prices started reacting in a violent way up.

(12:48):

So that's exactly what I did over the weekend. Actually, compare it kind of that winter freeze Uri Storm to kind of what we're living right now. And of course, like you said, what we're living right now hasn't

Sleiman Bassila (13:00):

... hasn't ended yet to take stock of the damage, but you can start having some ideas of how would it compare to that once in a lifetime event that seems to hit every five years.

(13:13):

So if you remember, and I went back to my notes, is Winter Storm Uri was a five-day event. So during those five days, and I was in Houston at the time, so lost power, lost heating, had to struggle to keep enough heat for us to stay in the house. But okay, beyond that, it was five days of freeze and crackers, natural gas pipelines, crackers, electricity, everything was kind of down for five days. So five-day event. After the five days, power started coming back slowly. Crackers looked at restarting slowly, polymer plants again, slowly out of that. And so that's kind of the extent that it's five days. And in terms of capacity that was impacted, I estimate at the time, something like 17 million tons of capacity, million tons a year. If the world is around 110 million tons a year of demand right now, you had, at the time, 17 of that kind of disappearing overnight. It's about 14% if you do them, 14% of the capacity of the time has gone to zero. And if you've seen, and we've lived through the results of that with escalating prices and topping, like we said later in the year at, I calculate, 37 cents above where they started pre-Uri. So they went from whatever, mid 40s to mid 90s into a dollar. So a significant uplift over several months from those five days.

(14:53):

Now, it was dramatic because you lost all supply overnight without preparing for it, always a bad scenario. To compare this to what's happening right now, so what's really bad about the current situation, well, there's many things that are bad to include people suffering and paying the price of this, of course, which is kind of the most sad about this whole setup. But in the energy markets, it's prices of oil and gas and all these that are going up. But really, really the main event is the closure of the Strait of Hormuz. So if you look at a map and you look where that strait is, it's not a very large strait and the navigation and path actually, so it's like maybe 20 some miles, 22 miles wide, and boats have to navigate within a couple of miles of dredged channel to make it in and out. So it's really the description of a choke point on global energy. And because now it's, although not there's no sign saying it's closed, it's effectively closed. Kind of one or two ships out of maybe 100 and plus are going through. So effectively it's shut down.

(16:14):

And what this is doing is it's trapping behind it, polymer capacity, but polyethylene is specifically that cannot get out. And therefore you fill your silos and you fill your warehouses and bags and then you shut down. I mean, there's no way to continue producing. Imagine you're the plant manager and you know that you can't get out of your plants because the roads are flooded, let's say. Would you continue to producing and stocking and you run out of inventory spaces? So that capacity is about 19 million tons in the Middle East, most of that is now either shut down or turned down tremendously. So if Uri was 17 million tons, this thing is 19 million tons of direct impact.

(17:11):

That's not where it stops though. And this is where I think most observers can miss it easily, that the effect of that closure is not only directly on polyethylene capacity, but all that feedstock that is produced in the Middle East, naphtha, crude, liquid energy products that have to go to Asia and Europe to be cracked into ethylene and polyethylene, that's also gone to zero. And that is a much bigger capacity globally that is impacted because all of a sudden the feedstock to those plants is constrained, it's very expensive, isn't showing up really in some cases. And that's a much bigger piece of the puzzle. That's 60, 61 million tons a year of capacity that's now-

Tom Hughes (18:03):

And how much was the Gulf Coast when you were hit? What was that? 17 you said?

Sleiman Bassila (18:06):

The Gulf Coast was 17 million-

Tom Hughes (18:07):

17.

Sleiman Bassila (18:08):

... let's say, at the time I estimate This one is 19 of direct and another 60, some 61 of indirect. So all of a sudden now half the production capacity in the world is either directly or indirectly impacted. And the timeline for it, of course, is undetermined. So we've been there on day 11 today. You guys tell me how long this is going to go so I can tell you how bad it's going to be, but even today, even if things go back to normal today, what people are missing is there'll be short, medium and long term repercussions to this that will be with us for a month on prices, for years in terms of readjusting the trade routes, de-emphasizing really the Middle East as the risk premium now is higher and maybe emphasizing other places in the world of the market.

Jamie (19:01):

So lots of questions come out of that. That was really good. I appreciate that. One of them, I think the first question I had as you were talking was just around when you shut a reactor down or even the feedstock, I would assume they're not, if they can't get rid of the feedstock or get that out too, those types of plants are also shutting down. What is the process to start those up? Is that 12 hours? Is that 12 days? Is that three months?

Sleiman Bassila (19:32):

Okay, that's a tremendous question because at one point the bombs will stop and at one point people are going to look at restarting and recovering. So let me take you from the least time intensive to the most time intensive in this chain. The easiest plant to start up, relatively speaking, is a polyethylene, polypropylene plant. If you have the feed, ethane or naphtha, you can start or you need the ethylene. Let's say the cracker is running, you'll start that up within a few days. It's not a big deal. It's kind of the easiest one to start up is a polyethylene polypropylene plant.

(20:14):

A cracker, a naphtha cracker that's one step upstream of that is a much longer process. You're talking weeks really to get on spec, maybe two, three weeks to get on spec and get kind of up to freight, maybe a month, up to a month. And those startups don't always go flawlessly. You get false starts and then you have to redo. So if the polymer plant was three, four days, I would say three, four weeks for a cracker.

(20:46):

Now let me take your upstream one more step here. If you have to shut an oil field or an LNG plant, those are going to be measured in month and not weeks or days. So you can see the cascading impact. And where we are right now, if you look at the news, some of these oil fields in that region are getting turned down and shut down, because again, there's nowhere to go. Your lifeline, Strait of Hormuz is shut, and now you fill your tanks and then what?

Jamie (21:20):

Yeah. Yeah.

Sleiman Bassila (21:20):

You have to shut down. So restarting LNG plants, specifically LNG plants and oil fields is a much more involved process and can take one, two, three to get the capacity.

Jamie (21:36):

And you're saying some of that's already happening. Some those oil fields are ... Yeah.

Sleiman Bassila (21:40):

So what will happen, and this is how I'm trying to describe it to folks, is it's not a straight ... The impact is not going to be linear with the duration, meaning that every day additional that the Strait is closed, the impacts are going to compound. They're going to add up in a nonlinear fashion. So a 20-day shutdown is going to be much more worse than double a 10-day. It's not a linear reaction. It's exponential. And this is where it can get really kind of dicey. You can see it right now in terms of how energy products and non-energy products, aluminum prices, helium is shown up short. Of course, gas in Europe has gone through the roof even much more than oil. Oil has responded, naphtha responded. Everything is responding to what they see right now. And there's a bit of a panic buying right now because people cannot secure the supply. The prices-

Jamie (22:44):

Do you have any thoughts on, going a little bit different direction on more the political side and the geopolitics, but in regards to the Straits, what kind of pressure does Iran have just even internally to open that up? Can they go a long time from an economic standpoint without opening them up? Or what's your thoughts on that?

Sleiman Bassila (23:11):

It's a good question. And I'm not a military expert, but I'll try to respond, Jamie. What I understand is it's almost you need to understand where these guys are at right now over there, they're fighting for survival. They're seeing their country destroyed, their leaders getting decapitated, and they're not going to do an economic math of I need this a few million dollars and therefore I'm going to ... This is kind of all or nothing for them.

Jamie (23:42):

Yeah.

Tom Hughes (23:42):

It's a different world.

Sleiman Bassila (23:43):

And therefore, which makes it a very dangerous situation when it's a cat in a corner, you can hardly predict how ... And you can see some of the reaction and the attack on the region. It's more than people thought would happen in a situation like this. And so that's kind of one aspect.

(24:04):

Now, do they have other outlets? Are they letting their ships go through and not ... They can do that too because the threat is through drones and through missiles and submarines. So you can be picky around who you let through. But yeah, I wouldn't count on them that forcing them. I think the pressure, to be honest, on the other side, on the world, economy is going to be the first thing to give here because I don't think you'd be able to sustain this for very much longer, the global economy, prices, inflation, et cetera.

Jamie (24:43):

Yeah. And I would assume-

Tom Hughes (24:44):

Jamie, I think ... Go ahead.

Jamie (24:46):

Go ahead, Tom. No, go ahead.

Tom Hughes (24:47):

I was going to say, I think the biggest difference now as you open up this with is that I don't think people understand. And the reason why people don't probably understand, not to belittle it, is because when we had Uri, it was in our backyard. We saw it, we could feel it. It was on the news, Texas, we had a deep freeze, it's home. And so when we talk to customers now, maybe early to mid last week, "What does Iran have to do with me?" And probably 15 years ago, even after I was in the industry for 15 years, I probably didn't understand either. It's more as we've got larger, more as we have our export channels, we see the direct impacts of what the now global economy is compared to when you and I started in the industry, Jamie, really wasn't that global. Now it is very global and all of these impacts have a direct ... All these events have a direct impact back home.

(25:36):

And that is why when you and I talk, Sleiman, and I talk obviously a couple times a day now regularly just regarding these events because people last week, our customers, their customers didn't quite understand the level of seriousness that this really is. And if you recall, we did bomb Iran back in June at one of their nuclear plants, but it was in and out. The minute they started

Tom Hughes (26:00):

Sending ships over there, warships, that's how you knew that once this happened, it was going to be prolonged. And all that flow that we have out of there, I think the three of us actually talk about it individually, but all the feedstock comes out of there too for other parts of the world, not just polyethylene. So they can't make it. And so if you look at it, and Simon, you can jump in here too.

Sleiman Bassila (26:19):

Yeah.

Tom Hughes (26:20):

North America right now is I think the sole provider for the vast majority of polyethylene, correct?

Jamie (26:29):

In the world, yeah.

Sleiman Bassila (26:29):

Yeah. So the world had two kind of regions that were exporting polyethylene and feeding the rest of the world, Middle East and North America. And now one of the two, they're kind of equal in size, equal-ish size. One of the two is down to zero. And so therefore the pressure...

(26:44):

So maybe Jamie, I want to pick up on this point that Tom made is people rightly saw maybe a converter saying, "I'm here in Minnesota or in Iowa, what do I have to do with what's happening on the other side of the world? I thought capacities in the US Gulf Coast and is in Canada and nothing happened there." To really visualize what's happening right now in boardrooms and for decision makers, put yourself in the place of the present producers.

(27:16):

Typically, they're global, Exxon, Dow, Lyondell, others are global producers. So they're looking at their customers overseas right now. They can't supply them from their Middle Eastern assets because those are behind the Hormuz. Their crackers in Asia and Europe are also restricted on feedstock. So they can't supply their current contracted customers overseas.

(27:43):

And therefore, all of a sudden, the guy in Iowa has a competition now from the guy in Singapore and the guy in China that is desperate to buy that pound of polyethylene and is ready to pay more for it. And this is the way commodity markets work is because it's such a globalized market, the polyethylene market, what happens in the other side of the world doesn't stay there. It triples through and has effects on all of us.

Jamie (28:11):

Yeah. And I think the other thing that we talked about and you described in detail is the Straits of Hormuz, but what we forget about in America or in North America really is the idea that how much of our global trade happens on shipping routes. And we think of stuff arrives to us either in a box, truck or a train, and it does.

(28:36):

That's where it arrives to our door, but that isn't where it started. Most of the stuff, it starts from a ship. And so I think that just getting the grasp of that and that choke point and how critical that is and strategic it is to the region and the world is really something we need to get our head around as consumers.

Sleiman Bassila (28:58):

Yeah. A rough number is 20% of those energy products crude in AFTA to the world, exports to the world. 20% of that is coming from that through that Strait of Hormuz as a rough number, of course. So therefore, there's no 20% spare capacity on any of this anywhere else in the world to make up for that loss, and therefore, it creates a supply crunch.

Tom Hughes (29:23):

Yeah. And if you look at, how's Limon opened up, we talk about this as bottom cycle and bottom cycle just means that there's more supply than there is demand. And if we look at what Yuri did to us in '21, we were supposed to be in bottom cycle there. We were adding more capacity than we had buyers with the expectation that years down the road, that that will level out.

(29:41):

So, Yuri was a disruption to bottom cycle, length, lower prices. Then we get out of that. And then if you look over the last three, three and a half years, very low pricing levels, all within five, eight, 10 cents of their self from top to bottom. Then you have an event. And we've talked about this with our customers, with some of our consultants. Any type of event, and this is a drastic event, we will have an impact and we'll continue now to probably push some of this out even a little bit further.

(30:13):

And that is, I think, the biggest thing that in our conversations with customers, they don't understand how we went from 10 days ago or let's go two weeks now to today. You talked about length, you talked about where we were, and this is going to look like this for an extended period. And then something like this happens. And it just goes to show you how large the global economic picture is and the impacts it's going to have, whether it's on our doorstep with Yuri down on the Gulf Coast or it's over in Iran or the Middle East.

Jamie (30:44):

And I think for people understood, and like I mentioned to you guys, a lot of the listeners on this podcast are involved in Prinsco's agricultural segment of our business and agriculture too, hasn't been in great economy right now. There's supply, more supply than there is demand. The pricing of those commodities, the corn and soybeans are pretty low.

(31:10):

But what happened here is you have all this excess supply in North America, but now with having to supply the entire globe, because half of it's down, that extra supply can go pretty fast. And that's what we're seeing is, Tom and I talking, if a producer like Prinsco wanted to pay double the asking price right now, there probably would be stuff available right now, but that doesn't mean if this goes on another week, two weeks, that that will be available. And that's why they're just holding onto it right now saying, we're stopping. Let's see how this goes.

Sleiman Bassila (31:45):

Everyone isn't-

Tom Hughes (31:45):

I can tell you, if you look at, Exxon is the global leader column. They have their fingers in everything and you look at how serious they took it last week, I think that could have been Tuesday or Wednesday, they came out with their 10 cent increase. That is telling you something. And if you remember, I told you, "Don't be surprised if there's another 10 cent increase on the table for April, don't be surprised."

(32:07):

I think somebody's already led with that, with 10 cents for April, maybe LBI or Nova. Those are only going to continue as this thing deepens. And if we look at, I mean, Jamie, I've been talking to you every day and your team, if you look at what Wednesday, Thursday, Friday, bought some opportunities jump in. On Monday, some suppliers said, "We're done selling." Because they are also...

(32:31):

There's so much volatility right now. We've talked about this earlier, Jamie, and my advice to people would be don't buy or not buy based on what you see oil trading at any day. Don't do that. Don't think because it was 120 Sunday afternoon in pre-market and it went down to 90 or 86 means, oh, we're going back top. Our president, like him or not, could say a couple words and make the market swing drastically.

(32:56):

And that's really all that happened. It didn't stop the bombing. It didn't start allowing shifts to go through. Until that happens, that is going to be the real kind of pressure point to release and to begin getting back to normalcy, which is going to take us live and said some time.

Sleiman Bassila (33:11):

Yeah. And that's the single... This is a great point, Tom, you make is people fixate on price accrued oil because it's kind of everywhere and is very visible and stuff, and it does impact-

Tom Hughes (33:22):

Yeah, of course it does.

Sleiman Bassila (33:23):

... our prices. But to me, if I had to be able to look at one metric and one metric only today to assess the situation would be the number of ships going through the Strait of Hormuz right now, because that will tell me if this thing is improving or constraining even more.

(33:43):

And I think the other point, Jamie and Tom, is this psychology change that going from very long to very short that suppliers to include consultants in the business are having a hard time getting to grasp fully. Okay, how could it happen? And if it's here, you know how bad it could be?

(34:08):

So simple advice, I mean, a simple kind of concept here in the next little while, you tell me how long this is going to last, is to worry much more about securing supply, Jamie. And especially pricing your products, giving yourself some options, there's a pricing, because this thing can go out of hand still even more.

(34:33):

And therefore, you don't want to be caught with quoting low because you're thinking of this is going to go away with one declaration from the White House. Even if it happens today and everything goes back today, it's going to be a while for this thing to normalize. So don't be caught with underestimating and underpricing. Overreacting to this is okay. Underreacting to this can get you in trouble.

Tom Hughes (34:59):

Cost you. I think also if we look at when this started, and going back to Simon's point on pricing, the most valuable thing right now is going to be supply. And we talk about pellet over price. Right now, the pellet is more valuable than the price because it's only going to increase.

(35:16):

When we look back at Monday the 2nd, which was a week ago, that morning I told everybody all offers are off the table from the previous week or 10 days before until we got our arms around what was happening. And Monday, Tuesday felt like, okay, we're starting to understand. By the time Wednesday hit, I was a full believer that this was major, a major event and this was only going to continue.

(35:37):

And then we get to Friday and the market probably saw at least, probably just look at spot side, at least a seven to 10 cents and maybe higher in some cases. And if I now look at... So, Jame, I think when you and I are talking on Friday, and it's only the sixth, it's only the sixth. Now we're at the 10th. We had yesterday, the 9th where some producers said, "Hey, we're not going to sell right now." And so we had a fair amount of buyers who took the back half of February off on buying because we all felt that as we got into March, end of month, end a quarter, there could be a little bit of recession there on pricing. We could see pricing kind of dip back down, not much of penny two, three cents, just like it's been doing for the last couple of years, but then this happened. So a lot of those buyers sat on the sidelines.

(36:24):

A lot of people sat on the sidelines last week, not necessarily believing the impacts of this. So you have just those buyers who play the spot market often, who sat out. Now what's happening, jumping this week, now you have large volume buyers coming in. And I mean the ones who are contracted with producers for several hundred million or a billion in some cases annually, now they're coming into the spot market.

(36:46):

So you have not just the cost going up, but now you have the activity going up, which is going to continue to drive that cost now. I'm not telling anyone to panic buy, go out there, buy everything. I'm just telling you how we see it in the day-to-day, minute by minute, hour by hour. And the amount of context we got to start this week are so much greater than the ones we had on Wednesday or Thursday.

Jamie (37:06):

Yeah. And I think I just want to add in here, and I appreciate that Tom, and the dates too, because we're recording this on March 10. It takes us a few days to release. And we plan on releasing this on March 13. Things could be different by then.

(37:25):

But I think the key that I've heard, and I just want you two experts to tell me if I'm right on this, but the key I've heard is even if things drastically change in the next three days and say the bombs stop and we release this on Friday for our viewers, it still impacts the market significantly the next few months.

(37:48):

And if this goes into next week or things could get worse too, but as things go here after they release, and a lot of people might not listen to this for a week or two from now, there is an impact that's going to last for a few months no matter what happens. And it could be longer if it doesn't, because that's always the trick is I want to get this information out, but it's real time.

Tom Hughes (38:10):

I think we're going to see a series of ceilings and it's going to be like, okay, sell, hold, sell, hold, until we do finally hit that peak or that breaking point, so to speak. But it's going to be a series of probably ceilings or highs until the market really gets a grasp in terms of what the impact...

(38:31):

And by the way, that goes for these global companies, I truly believe they don't really know the impacts yet themselves. That's why they're like, "Hold a little bit."

Jamie (38:41):

That's fair and scary at the same time, I think.

Sleiman Bassila (38:45):

Yeah. Some companies like the Exxons of the world are very well-positioned to see everything. They see the oil, they see the refining and they see the chemicals. But I agree with Tom, even there you're like, okay, the world is so big, it's so interconnected. Now shortages

Sleiman Bassila (39:00):

... are showing up everywhere. Just overnight, I got a message from an Australian molder saying, "Can I buy from the US right now?" Because what's happening is these traders, global traders, are also getting short on resin. And they thought they had supply from China, they thought they had supply from the Middle East, and of course they thought they had good supply from the US. This is evaporating very, very quickly, as even the producers are not sure that they want to sell right now. Forget about the price, that they want to sell, they want to give up that resin that could become even more scarce in the near future.

(39:40):

So this will be with us. This will be valid on the 13th as well, because the way out of this, Jamie, is not going to be overnight. You're not clicking a switch and going back to where you were on February 27th, 26th. It's going to be with us for a month, for a while, as we recover from this. And the long-term effects are also going to be interesting, because now you thought you had a very secure source of supply from the Middle East and from North America, but from the Middle East in particular, and you just realized that that's no longer the case and won't be the case for a while, because these things don't go back and people forget what happened with facilities being hit and et cetera. And therefore, the risk premiums on shipping, the cost on supplying out of the Middle East, the risk premium in general out of there is going to be higher and therefore more pressure, more demand on more secure, lower-risk North American supply.

Jamie (40:46):

Yeah, and I appreciate that. Maybe we can talk just a little bit more about that. But I just want to add in here too, for our listeners, the people that are going to listen to this, what Prinsco's plan to do here is just to keep you informed. We don't know either, but we're going to keep you informed and do everything we can to supply you with what you need. I don't think that's going to be an issue that we're going to be able to supply you because we do have a lot of material. Where this is going to go as far as pricing-wise and things like that, just ask you to be patient and we're going to do the best we can to serve your needs and be easy to do business with.

(41:26):

So that's important to say and to give you this information here, so I think that leads a little bit into, again, a little bit more on that long term. If the Strait of Hormuz is really a pinch point, that's not going to change. This is an opinion question for you, but in your opinion, how do you see that playing out, say, 10 years from now with, does other areas of the world, does the US grow more and supply for globally so that they don't have that risk? Or what's your opinion on that?

Sleiman Bassila (42:05):

Well, 10 years is a long time. I think in 10 years-

Jamie (42:08):

It is going to be for Tom and I. I know that.

Sleiman Bassila (42:14):

For Tom and you. Okay.

(42:14):

I think in 10 years, I think things will rebalance just fine. We're talking about maybe five years and less things I think you will see even out of kilter a little bit. In the short term, a lot out of kilter. And the medium term, a bit. In the long, long term... Okay, so here's the sentiment in the industry, especially among consultants right now, is that they blame China for all this new investments in polymer capacity because, of course, China was always doing it for self-sufficiency purposes rather than to make money. That is proven the right strategy for China right now, to be even more self- sufficient in terms of energy, in terms of plastic, in terms of everything they make. So I think that will drive them to even double down on those type of investments locally because they can't trust now whatever is coming from overseas.

(43:14):

And I think this will be the feeling is, "I need to have it. Here, I'm going to order just in case, not just in time, because I don't trust what's coming." A little bit of what we lived through after COVID, during COVID when there was some shortages, strong shortages. People learned that what I have under my hand is secure, but I can't count on anything that's coming from overseas and stuff. So I think that drive for self-sufficiency is going to accelerate there, if anything.

(43:47):

US and Canada are really in a good position in the future. Now, whether demand can keep up with all that new investment, I think once you get out of this, maybe in a couple of years, a year or two, let's say, you will be living in another oversupplied, globally oversupplied conditions again. I don't think this goes away, Jamie, because demand doesn't catch up that quickly with supply. Between now and then though, what happens is anyone's question. And it really depends on, again, this is the big point, it depends on the duration of this crisis and duration of the closure of the strait. That will determine how bad it's going to be.

Jamie (44:26):

Yeah. I appreciate that. This is great conversation. I appreciate it from both of you. Any final thoughts, things that we've missed here, Tom or-

Tom Hughes (44:36):

Yeah, I would just say, it's because we deal with it very similar to you, Jamie. We are not a major producer. We got to make these phone calls to our customers and have those hard conversations and the understanding of help them understand in terms of what's going on from what we see on the supply side. It is going to be volatile. I would urge anyone not to buy or not to buy based on the swings of oil.

(45:02):

Contrary to whether you're a... We're not going to take over the Strait of Hormuz. That would actually be a much longer war, I think, if we try to do that. So I don't think that's going to happen. You got to pay attention to the global marketplace, most certainly your own market, but we're very much affected by this, and that's going to continue to be so, I think, for some time. And some of the pricing is going to be hard to stomach for some folks, and those are going to be hard conversations for your sales team and for us.

(45:31):

The thing is, almost... Even though you guys make the pipe, you have your installers, you have your farmers, and then we obviously distribute the resin. And in our world, it is a commodity. In your world, you guys don't talk about it as a commodity. Well, guess what? Everything is going to be a commodity now that it's affected by what's happening over there, meaning there's going to be more value to your finished product than there was 10 days ago, just because depending on how much there is going to be of it in a month, two months, three months.

(45:58):

Again, I think that we're going to be just fine here in North America when this dust settles. Pricing is going to be elevated. How long it's going to be elevated for, I don't know. I think the Strait of Hormuz opening, if it happens before this even airs or well after, that is going to be that point where then maybe they can assess, producers can assess. They share information with us. They share information with consultants in terms of how you look at the market moving forward in a much bigger picture.

(46:26):

But this is the thing that we've been talking about for some time, that the only thing that could change this market was going to be an event. And this is as major of an event as we've had. I've been doing this 31 years, and hurricanes, my God, the financial crisis. That's when last time I think oil was at a 140 or 150, went all the way down to 25. So we saw that going the complete opposite way. This is one of those major events that is probably going to shift the industry and supply, for sure.

Sleiman Bassila (46:58):

And one last thought, maybe to build somewhat on Tom's comment here, is by its very nature, Jamie and Tom, wars are uncertain. And unfortunately, I have a personal experience with that in my youth. We won't go there. However, it's uncertain, meaning that you don't know what's going to happen tomorrow or the next hour. I think what you can do though, think back to the things you can control, is communicate. Communicate with your suppliers, communicate with your customers, communicate with trusted consultants out there to try to figure out how it's affecting your business and what you have to do to protect yourself and maybe not be penalized by the events, not be the victim of these events.

Jamie (47:44):

Very good. Very good place, I think, to close. I appreciate those comments a lot. And that is the whole reason why we wanted to do this, was to communicate. And so I thank you guys for what you do in the industry, for what you do for our company and keeping us informed, and for the friendship. And appreciate-

Sleiman Bassila (48:06):

Appreciate it.

Jamie (48:07):

... you being part of The Water Table today. Thank you very much.

Sleiman Bassila (48:10):

Perfect.

Tom Hughes (48:10):

Thank you, Jamie.

Sleiman Bassila (48:11):

Thanks, Jamie.

Tom Hughes (48:11):

Appreciate it, man. Thanks for including us.