Middle Eastern geopolitical conflicts cause regional energy fluctuations, which are transmitted through the global petrochemical supply chain to the basic consumer markets in Asia.
The prices of plastic products such as plastic bags, plastic food containers, and food trays are still rising. In many Asian regions, individual vendors are facing a dilemma: if they raise prices, they lose customers; if they don’t raise prices, they will incur losses.
Even if the US and Iran sign a memorandum of understanding and shipping in the Hormuz Strait gradually resumes, the recovery of the supply chain will still be slow. The operating pressure on small and micro merchants will not be relieved in the short term.
The main raw material for daily-use plastic products is ethylene, which is primarily produced from naphtha obtained during the petroleum refining process. Data shows that approximately 60% of imported naphtha in Asia relies on supplies from the Gulf region. The Strait of Hormuz, being a crucial shipping route, has been blocked for several months, directly leading to a shortage of naphtha and a sharp rise in prices.
Affected by the soaring raw material prices, leading enterprises in core petrochemical production areas in Asia such as Japan and South Korea have reduced production capacity, further exacerbating the supply gap for downstream plastic products. This has driven up the prices of daily necessities. In the entire industrial chain, grassroots traders, who have the weakest bargaining power and the worst risk resistance capabilities, have ultimately taken on the full burden of the rising upstream costs.
According to Agence France-Presse's report on the 29th, vendors in many Asian regions say that there are currently no viable alternatives to plastic products used in their daily operations. They can only passively endure the impact of rising prices. Many merchants said bluntly, "We simply have no choice."
In the Songjiang Market in Taipei, Taiwan, China, a 52-year-old chicken vendor has personally experienced a sharp increase in cost pressures. In early June, she reported that the price of commonly used plastic bags in her store had risen by nearly 60%, and the cost of plastic pallets has also increased by one-third.
"We can't escape plastic bags wherever we go, and even food containers are all single-use plastic products." She said, adding that since she was afraid of raising the prices for goods rashly, all additional costs would be borne by vendors themselves.
A 78-year-old grocer also shared this sentiment. She said, “We really have no choice. If we don’t give customers plastic bags, they will complain.”
Ethylene Plant IC Photo
Similar issues are occurring simultaneously in the Southeast Asian market. In Bangkok, Thailand, a 60-year-old vegetable vendor who works with a mobile stall service estimates that his overall operating costs increased by 30% after the conflict began.
His selling method relies heavily on packaging dishes in plastic bags and sealing them with rubber bands. These materials are essential for his daily operations. "After the conflict started, my profits decreased, but I simply didn't dare to raise prices from customers."
A 62-year-old vendor who mainly sells bagged rice porridge is also struggling with business difficulties. He said, "Everything is getting more expensive, and I can only endure it. I can't think of anything else that could bring as much convenience to customers as plastic bags."
Although the United States and Iran have signed a memorandum of understanding, and navigation has resumed in the Strait of Hormuz, there is still a significant lag in market recovery, and the prices of petrochemical raw materials have not reversed quickly. Currently, the price of naphtha has only slightly decreased, and many petrochemical companies are still dealing with raw material inventories purchased at high prices during the conflict.
The production data of Taiwan's Taipower Company clearly reflects the pressure faced by the industry. In early June, the company announced that it would reduce the operating rate of its ethylene steam cracking unit from 53% at the beginning of the conflict in March to 35%. The company analyzed that the current problem is not solely due to a shortage of raw materials; the more fundamental issue is that raw material prices have become absurdly high, and many downstream customers are simply unable to afford them.
According to reports, the shortage of plastic supplies in South Korea remains severe even at the beginning of June. An employee at a store in Seoul said that the usual one-week delivery period for 10,000 plastic bags has now been extended to over a month, with prices rising by 30%. The owner of a nearby dry cleaning shop said that the price of plastic dust covers has doubled. A coffee house owner also reported that the cost of plastic cups has increased by 50%.
The Korean Plastics Industry Association stated that the conflict forced manufacturers to raise prices, but the establishment of alternative supply routes helped stabilize the situation. The Secretary General of the Indonesian Olefin, Aromatics, Plastics and Chemical Industry Association also said that turning to suppliers from China and Africa effectively curbed further price increases.
Filipine manufacturers said they have absorbed some of the additional costs. Steve Tavera, a member of the Philippine Plastics Industry Association, said, “Our profits have been squeezed, and we cannot simply raise prices, as this would lead to our being overwhelmed by imported products. Therefore, the current price increases have been kept relatively moderate.”
It is worth mentioning that China's energy structure features a pattern of "rich in coal, poor in oil, and scarce in gas". Since the first oil crisis in the 1970s, the country has launched a strategy to use coal instead of oil. Starting from 1980, the Dalian Institute of Chemical Physics of the Chinese Academy of Sciences, through the efforts of three generations of researchers, upgraded the methanol-to-olefins (DMTO) technology to its third generation and completed its industrial application.
As of 2024, this technology has signed 32 licensing contracts, resulting in a production capacity of 21.6 million tons of olefins per year. Seventeen plants have been put into operation, with annual olefins production exceeding ten million tons. This represents about one-third of the country’s total olefins production capacity. There are also plans for further capacity expansion during the “15th Five-Year Plan” period.
The economic viability of coal-based chemical products becomes particularly evident when oil prices are high. Investment analyses indicate that the break-even point for producing olefins from coal is around $45 to $50 per barrel. When international oil prices exceed $100, the gross profit margin of coal-based olefins can exceed 38%, and the operating rate of production lines can directly reach 100%, even operating at over capacity. This is precisely the core reason why there has been no shortage of plastic bags in China during the Middle East crisis.
