Brace for the Plastic-Price Hikes

The Iran war’s effect on fuel prices is easy to see, not least in the climbing numbers on gas-station signs. Less visible is the disruption cascading through another part of the fossil fuel–based economy: plastic production. Before long, prices not just for the gasoline that goes into cars but for the parts that make them—along with the cost of toys, furniture, clothing, and more—could start climbing too.

The plastics that proliferate through modern life are almost all made from oil and gas derivatives or by-products. Until the conflict began, many of the chemical ingredients that go into plastics, the ingredients for those ingredients, and raw plastics themselves originated in the Middle East. The Strait of Hormuz closure has already created shortages of key ingredients, which could mount into shortfalls of some plastics and plastic products. Even if tensions ease and the strait reopens soon, untangling supply lines would take months, likely until the end of the year, experts say.

So far, Asia, whose plastic makers depend heavily on oil and chemicals traveling through the strait, has borne the brunt of the disruption. In China, Taiwan, Thailand, Indonesia, and other industrial powerhouses, many petrochemical producers have declared force majeure, invoking emergency provisions to warn that they might be unable to fulfill contractual commitments.

Some have scaled back production as they’ve run short of crucial ingredients such as naphtha, a crude-oil derivative. South Koreans began panic buying trash bags in March (although the run has since eased), and officials in Taiwan asked plastic suppliers to prioritize medical uses to avoid shortages of vital items. India’s biggest bottled-water seller raised prices by more than 10 percent because of escalating costs for its bottles and caps.

Given Asia’s role as a manufacturer of goods exported around the world, its troubles may soon ricochet more widely. Malaysia, for example, makes nearly half of the world’s synthetic rubber gloves. One producer announced that it would wind down operations this month because of spiking prices for raw materials, and others are raising prices by as much as 40 percent. Southeast Asia also makes a lot of tires, and Alexander Tullo, who covers plastic production for Chemical & Engineering News, told me that “if they’re seeing constrained synthetic rubber, maybe that means that the tire production will be affected too.”

Already, the prices that manufacturers pay to buy plastic are spiking everywhere. Dow, for example, hiked its North American polyethylene price by 10 cents a pound in March, then announced a 15-cent increase for April—which it promptly doubled—followed by another 20-cent jump planned for May.

“This is not normal for how prices are handled in this industry,” Anne Keller, a petrochemicals expert at Midstream Energy Group, a Texas-based consultancy, told me. “It’s essentially, ‘We can get it, so that’s what we’re going to charge.’”

In China, prices of polyethylene, polypropylene, and polyethylene terephthalate, or PET, the plastic typically used to make drink bottles, have all surged by at least 30 percent, Albert Li, a chemical analyst at Bloomberg Intelligence in Hong Kong, told me. Polyester, widely used in clothing, carpets and furniture, is getting more expensive too.

Jay Foreman, the CEO of Basic Fun, a Florida-based toy company whose brands include Tonka, Lite-Brite, and Care Bears, was recently in China meeting with contractors producing his products.

“Obviously, everybody is incredibly concerned,” he told me. Many of his suppliers bought large stocks of plastic when oil prices were low, so they haven’t hiked prices yet. But “they are signaling to us looming cost increases and supply-chain shortages.”

Such shortages are his primary worry, he said, because toy companies, especially smaller ones like his that can’t match the spending power of bigger rivals, are typically near the back of the line when supplies are tight. “We don’t have any leverage, so we’re at the whim of the market.”

Soon, he’ll have to lock in toy prices with retailers for spring 2027. Last year, when President Trump slapped tariffs on many imports, Basic Fun didn’t have time to pass on the new costs. “We had to eat them,” Foreman said, and he expects to be in the same position if he has to cough up more for toys in the coming months.

In other sectors, such as packaging, inventories move faster. Manufacturers and retailers may temporarily absorb the hit, but “they’ll pass it on as soon as they can,” Ed Hirs, an energy economist at the University of Houston, told me. “It’s one of these pernicious price increases that’ll just inch its way into the consumer’s wallet.” The impact won’t be as big as that from fuel-price spikes, Hirs said, “but it’s there and it will” fuel inflation.

Among the biggest beneficiaries so far are companies making plastics in the United States. They are significantly less dependent on the Middle East for the ingredients because they source important ones domestically, from fracking. In recent years, petrochemical companies have plowed more than $200 billion into plants, many of them in Texas and Louisiana, that turn fracking by-products into plastic and other petrochemicals.

After China expanded its own plastic production, a global glut pushed down prices, as well as petrochemical companies’ profitability. The war abruptly changed that. Dow and other producers with extensive American operations are not paying dramatically inflated prices for their raw materials, Keller said, but plastic markets’ new tightness means they can charge their customers more. “They’re going to make a lot of money if this persists, and they’re probably making a lot of money already,” Tullo said. (The American Chemistry Council, the trade group that represents petrochemical producers, declined to comment. The Plastics Industry Association did not reply to an email requesting an interview, nor did Dow.)

Even so, Americans remain vulnerable to plastic and product shortages if the conflict continues. Plastics made from the ingredients available in the U.S. are most suited for producing single-use items such as bags, bottles, and disposable goods, Keller said. More durable plastics, including those used in car parts or some medical equipment, must be made from oil derivatives and are often imported from Asia. That means supply hiccups “may kick in sooner rather than later,” she said. Many people have internalized the idea that gas prices depend on global events; now they may be forced to recognize that dependence on plastic makes the world similarly vulnerable.