At the beginning of March, a military conflict in the Middle East is rapidly reshaping the price curve of the global plastics market.

On March 9, international crude oil prices surged at the market open, with both WTI and Brent Crude futures prices breaking through the US$110 per barrel threshold for the first time in over three years.

As of the morning of March 9, the latest international crude oil prices. (Source: Economic view)

Meanwhile, the domestic plastics market also experienced sharp fluctuations — with the prices of certain raw materials such as ABS and PC surging by over 40% within a week.

In Zhangmutou, Dongguan, a key plastics trading hub in Southern China, a rare scene emerged: "warehouses were full to bursting, with trucks lining up for hours".

From oil futures to plastic pellets, from the Middle East straits to warehouses in China, a clear price transmission chain is taking shape. Behind this volatility lies not just a short-term conflict risk, but yet another manifestation of global supply chain fragility.

From the Strait of Hormuz to plastic pellets: How is the price transmitted

The reason the Middle East situation can rapidly impact the plastics industry comes down to one geographical node: the Strait of Hormuz.

Approximately 20% of the world's oil trade passes through this strait. Once shipping is disrupted, market concerns over energy supply are quickly reflected in oil prices.

Recent tensions have led to increased shipping risks, causing international crude oil prices to climb rapidly. As oil prices rise, a chain reaction across the chemical industry is triggered.

Plastics are typical petroleum-based products. Following an increase in crude oil prices, the costs of basic chemical feedstocks like naphtha, ethylene, and propylene rise simultaneously. This, in turn, drives up the prices of engineering plastics such as ABS, PC, and PA.

This process often exhibits a clear "step-by-step transmission":

Crude Oil → Basic Chemical Feedstocks → Commodity Plastics → Modified Materials → Downstream Manufacturing

In this recent shock, market sentiment has also amplified price volatility. Fearing further cost increases, traders began stockpiling, securing supplies, and withholding inventory, while downstream companies, worried about more expensive future procurement, rushed to place orders in advance to lock in prices.

This resonance of supply-demand psychology rapidly pushed prices higher in a short period.

Zhangmutou: The “wind vane” of the plastics market

The ripple effects of rising oil prices quickly became visible in Zhangmutou, Dongguan—a key plastics trading hub in China.

As one of the country’s largest distribution centers for plastic raw materials, it brings together resources from over 60 countries, more than 900 petrochemical plants, and over 3,000 new materials companies.

In 2024, Zhangmutou’s plastic raw material trading volume reached approximately 15 million tons, with transaction value exceeding 100 billion RMB. Its price index is often regarded as a “barometer” of the domestic plastics market.

A recent video circulating online showed severe traffic congestion around the Zhangmutou plastics market, with long queues of trucks waiting to enter warehouses for pickup, and local public storage facilities reportedly at full capacity.

Persistent “massive traffic jam” around the plastics market in Zhangmutou, Dongguan. (Source: 21st Century Business Herald)

The plastics industry traditionally experiences a peak season known as "Golden March and Silver April". However, this year’s market movement has clearly deviated from the conventional cycle. According to industry platform statistics, since the escalation of the Middle East conflict on February 28, some raw materials like ABS and PC have seen extreme pricing situations, with quotes reportedly changing “every hour”.

Against this backdrop, how will various segments of the industrial chain respond?

Industry chain response: Price hikes, locked-in supply, and wait-and-see

Upstream companies are taking the lead in responding to rising costs by raising prices and controlling output.

On March 1, Wanhua Chemical announced a 5% to 10% price hike on its PA12 series products.

On March 4, BASF announced a global price increase for its antioxidants, process stabilizers, and light stabilizers, with some products seeing hikes of up to 20%.

Also on March 4, Zhuhai Kingfa Biomaterials Co., Ltd. issued a price adjustment notice, raising PBAT resin by RMB 700/ton and modified materials by RMB 500/ton.

On March 7, Kingfa Science & Technology issued an open letter to its customers, stating that it would ensure supply through global sourcing and in-house synthesis of certain raw materials, while also adjusting prices on some products in line with raw material cost increases.

On March 7, Kingfa Science & Technology released an open letter to customers. (Source: Kingfa)

In contrast, midstream modified material producers are facing greater operational pressure: rising raw material costs, difficulties in synchronizing order prices, and limited room to renegotiate long-term contracts. Many of these companies have little choice but to lock in high-priced raw materials to maintain production, while renegotiating order prices with customers.

Downstream companies are taking divergent approaches:

Some, fearing further price increases, are choosing to procure early and lock in inventory. Others are adopting a more cautious approach—signing periodic supply agreements or deferring orders to reduce procurement risk.

Overall, a clear transmission path is taking shape across the market:

Upstream: price hikes and supply control → Midstream: locked-in material costs and absorption → Downstream: a mix of panic buying and wait-and-see

How long will the price hikes last?

Looking at historical trends, sharp increases in plastic prices often follow a distinct cyclical pattern.

In the short term, war, transport risks, and market sentiment may continue to drive prices upward. However, in the long run, price trends are still determined by supply and demand.

At present, global chemical production capacity remains relatively ample, while end-user demand has not seen a corresponding surge. Once market panic subsides and logistics return to normal, prices tend to ease.

Thus, the industry consensus is: in the coming period, plastic prices may continue to fluctuate upward, but the likelihood of sustained sharp hikes is low.

Beyond the war: A quiet shift in the industry chain

Although this round of price hikes may be a temporary fluctuation, it once again highlights a key reality: the global plastics industry chain remains highly dependent on oil and geopolitics.

When energy supplies become uncertain, the materials sector is often the first to feel the impact.

This is prompting more companies to rethink a few critical questions:

• Is there a greater need for regionalized supply chains?

• Should the shift toward recycled and bio-based materials be accelerated?

• Can technological innovation reduce reliance on raw materials?

In other words, the price volatility triggered by conflict may be more than just a short-term market movement—it could serve as a catalyst for industrial transformation.