News
03/03/26
Mideast war to tighten LatAm polymer supply: Update
Mideast war to tighten LatAm polymer supply: Update
Add information on shipping at Strait of Hormuz, Red Sea and Mideast Gulf
regions. Sao Paulo, 3 March (Argus) — The US-Iran war has heightened security
risks across Middle East sea lanes and disrupted polyethylene (PE) and
polypropylene (PP) flows into Brazil and the wider Latin American market as
carriers suspend loadings, impose emergency surcharges and reroute vessels
around the Cape of Good Hope. Some containership owners, such as CMA CGM,
earlier announced an "emergency conflict surcharge" of $3,000/feu (forty-foot
container), or $121/metric tonne (t), on all loadings from ports in the Mideast
Gulf and Red Sea regions but have since suspended operations out of the Mideast
Gulf. Shipping is now possible only from the Red Sea region and some ports
outside of the Mideast Gulf, but the situation remains dynamic and it is unclear
which carriers are still calling at these ports, particularly when sailings
involve transiting through the Bab el Mandeb strait. Despite the cost surge,
vessel space remains constrained as shipowners cut departures on high-exposure
routes and roll bookings. Capacity tightness is most visible on short-notice
shipments to South America's east coast, a global trader said. Rerouting vessels
around the Cape of Good Hope is lengthening voyages and creating equipment
imbalances, stretching lead times and undermining production planning for
converters dependent on imported resin. Buyers report more blank sailings,
delayed laycans and shifting arrival times as carriers adjust rotations.
Additional insurance requirements and onboard security measures are adding time
and cost, weakening schedule reliability into Santos, Manaus and other Brazilian
ports. Transit through key canals is technically "restricted and unreliable"
rather than fully closed, but the operational outcome is similar, with fewer
departures from Gulf export hubs and fewer relay options into Mediterranean
transshipment points, a source said. Equipment shortages on feeder services and
rising premiums for guaranteed space are adding further friction. Higher landed
polymer costs The conflict's immediate effect on Latin American polymer markets
is rising landed costs. Import-parity formulas are absorbing new surcharges and
longer routes, lifting cfr Brazil indications even without adjustments to fob
values. If reduced departure frequency persists, participants expect spot
tightness to surface into late March, particularly for PP grades with limited
substitution options on the demand side. Domestic production can offset part of
the shortfall but cannot fully cover a sharp reduction in Middle Eastern
arrivals if carriers deepen schedule cuts. Middle Eastern suppliers remain
central to Brazil's polymer balance. Saudi Arabia was Brazil's second-largest PP
supplier in 2025, sending almost 140,080t, or 20pc of the country's imports. As
for PE, Saudi Arabia ranked third at 56,445t, while Egypt placed fifth with
nearly 47,795t last year. Brazilian polyvinyl chloride (PVC) buyers also
increased purchases from Egypt by 68pc last year to around 100,090t. Converters
are adjusting sourcing strategies by front-loading purchases, widening delivery
windows and considering alternative origins with lower exposure to higher-risk
routes, even when nominal resin prices are higher. "The situation will not
normalize in one or two weeks," one source said. "News changes by the hour,
owners are cautious, and freight alone will lift cfrs across Brazil and the rest
of Latin America." Market participants describe the disruption as global. With
elevated risk premiums and major carriers avoiding vulnerable passages,
surcharges and extended transits are expected to persist, supporting delivered
PE and PP values until security conditions allow a broader return to standard
routes. Aiming to restore normal transits, president Donald Trump on Tuesday
said the US will offer political risk insurance and naval convoys for ships
transporting energy and other commodities through the Mideast Gulf. Meanwhile,
Brazil petrochemicals giant Braskem has also adjusted its domestic pricing in
response to the tighter logistics environment. The company withdrew the pricing
policy it released on 28 February and issued a revised schedule on 2 March,
increasing PE and PP prices across all grades. Braskem lifted LDPE, HDPE, LLDPE
and metallocene PE values by R500/t ($95/t), with no bonuses applied. As for PP,
the company raised homopolymer and copolymer prices by R250/t, also without
bonuses. Market participants said the revision reflects both escalating freight
costs and expectations of reduced availability from traditional import origins.
Brazil's naphtha cost could rise The US–Iran conflict is adding pressure to
Brazil's chemical chain through higher oil prices, exchange rate volatility and
tighter availability of key feedstocks, chemical industry association Abiquim
said on 3 March. While no physical disruptions have emerged, Abiquim warns that
a sustained increase in Brent crude values will raise petrochemical naphtha
costs, a structural vulnerability for a country that remains a net importer of
derivatives. Rising energy benchmarks could narrow petrochemical margins and
weaken Brazil's position against regions that produce more gas. Additional risks
extend to nitrogen fertilizers and chemical intermediates, given Iran's role as
an exporter of urea, ammonia, methanol and derivatives. Brazil imports about
85pc of its fertilizer needs, leaving agriculture and downstream producers
exposed to potential price spikes. Abiquim also cited macroeconomic risks, with
geopolitical uncertainty typically driving a stronger US dollar and raising
import costs for industrial inputs and equipment. The situation underscores
structural weaknesses in Brazil's chemical chain and the need for long-term
policies that reduce dependence on imported naphtha, fertilizers and other
strategic inputs, the group added. By Fred Fernandes and Isabela Mendes Send
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