Analysis-Iran war chokes petrochemical supply, sends plastic prices soaring

By Pooja Menon and Pranav Mathur

March 26 (Reuters) - Disruptions to lipid and petrochemical flows done the Strait of Hormuz pursuing the outbreak of the Iran warfare person tightened planetary chemicals proviso and lifted prices of plastics and polymer, utilized successful everything from car parts to toys, to astir four-year highs.

About $20 ‌billion to $25 cardinal worthy of petrochemical products walk done the Strait annually, according to Rabobank, underscoring the information that continued disruptions to this travel would propulsion ‌producers to walk the higher costs connected to consumers.

"Anyone who imports from the Middle East, which is beauteous overmuch everyone successful the remainder of the satellite to a definite extent, has mislaid a ample supplier ​and is having to scramble to find replacement resin astatine extraordinarily higher prices," said Joel Morales of Chemical Market Analytics by OPIS.

The Middle East accounted for implicit 40% of polyethylene exports successful 2025, led by Saudi Arabia, and ships to astir each portion extracurricular North America, the adjacent largest exporting region.

Prices for plastics specified arsenic polyethylene (PE) and polypropylene (PP) person surged since the Middle East struggle began, tracking higher crude and feedstock costs. [O/R]

"Global logistics person go uncertain, with up to 50% of polyethylene proviso either offline, constrained oregon being impacted pursuing the events ‌in the Middle East," said Dow CEO Jim Fitterling.

FEEDSTOCK SHOCK ⁠RIPPLING THROUGH CHEMICALS

Analysts said the Strait's closure could disrupt astir 1.2 cardinal barrels per time of planetary naphtha export flows, further tightening feedstock availability for the accumulation of petrochemicals.

The warfare has sent Asia's naphtha refining borderline supra $400 a ton implicit Brent crude from astir $108 a ⁠ton earlier the struggle started, according to LSEG data.

Maksim Sonin, vigor enforcement astatine Stanford University's Center for Fuels of the Future and Hydrogen Initiative, said the spike successful prices reflects a increasing "risk premium", with Asia peculiarly vulnerable, fixed its dense reliance connected naphtha arsenic a cardinal petrochemical feedstock successful plastics production.

Japan, South Korea and India, among others, are astir exposed owed to their dependence ​on ​imported crude and petrochemical inputs.

ASIA, EUROPE SQUEEZED AS U.S. GAINS EDGE

Plastic manufacturers successful Asia and Europe, ​which are heavy reliant connected imported feedstocks and Middle East supply, ‌are facing higher input costs and tighter margins.

Europe is being squeezed by rising feedstock costs and imports, portion surging naphtha prices person created a disconnect with declaration pricing, leaving producers struggling to walk costs onto customers, LyondellBasell said.