Iran War Triggers Plastic Shortage in Asia, Affecting Industries and Supply Chains

The Iran war has caused an oil shock that is leading to shortages of plastics in Asia, impacting various industries. Asia imports about 70% of its naphtha, a key petrochemical feedstock for polymers like polyethylene and polyethylene terephthalate, from the Middle East.

These materials are used in food packaging, cosmetic containers, plastic bags, and medical consumables, with prices increasing since the conflict began and supplies became restricted through the Strait of Hormuz. Chen Ping-Kuo, a professor in industrial engineering and management at Japan’s Ritsumeikan Asia Pacific University, stated that the stability of plastic as a basic industrial material has been affected.

He added that disruptions will spread through supply chains in Asian societies that rely heavily on plastics.

April 20, South Korea’s health regulators started a nationwide investigation into intermediaries and firms suspected of hoarding syringes, needles, and gloves, which are made from oil-derived chemicals. The healthcare sector faces shortages of polypropylene and PVC, limiting availability of syringes, IV bags, and sterile packaging.

Li Dong, a supply chain engineering expert from Singapore’s Nanyang Technological University, said this could become a public health risk in countries with strained healthcare systems, such as India, Indonesia, and the Philippines. He noted the most critical impacts may occur in the food industry, where plastics extend shelf life and reduce spoilage in places with weak cold-chain infrastructure.

Hospitals and clinics are ordering extra stock in anticipation of price increases, creating bottlenecks, according to Jung Chul-woo, a representative from the Korea Medical Devices Association. For example, Malaysian dairy brand Farm Fresh reported to the Straits Times that a shortage of PET resin, used in beverage bottles and food containers, has led to milk cartons being unavailable on supermarket shelves.

The crisis is prompting consideration of a 'Middle East plus one' strategy to reduce reliance on the region, similar to the 'China plus one' approach after the COVID pandemic. Li Dong stated that if the disruption lasts a year or more, adaptations are likely.

Manufacturers of recycled plastics and alternatives like paper, bamboo, and bagasse-based packaging are seeing increased demand. The price of recycled plastics has risen from an average of $400 per ton before the crisis to $1,600 per ton, according to Li Dong.

Chen Ping-Kuo explained that the narrowing price gap between virgin and recycled plastics is changing investment patterns in Asia, though the recycling industry remains underdeveloped due to issues like fragmented collection and contamination.

The shortage is expected to affect small- and medium-sized enterprises more than larger firms, which have access to hedging, long-term contracts, and inventory buffers, according to Chen Ping-Kuo. If the crunch continues, it could lead to closures and consolidation among smaller manufacturers in sectors like plastic toys, packaging, and basic consumer goods.

The impacts may extend beyond Asia, with rising costs affecting global brands and retail markets in Europe and the United States, increasing procurement expenses and lead times, as noted by Chen Ping-Kuo.