News
03/03/26
Middle East shock to tighten LatAm polymer supply
Middle East shock to tighten LatAm polymer supply
Sao Paulo, 3 March (Argus) — Heightened security risks across Middle East sea
lanes because of the US-Iran conflict could disrupt polyethylene (PE) and
polypropylene (PP) flows into Latin America as carriers suspend sailings, impose
emergency surcharges and reroute vessels around the Cape of Good Hope. Carriers
have introduced emergency and war-risk fees on Middle East–Atlantic corridors,
market participants said. Traders are citing initial guidance near $1,500/20ft
equivalent units and prompt offers around $3,000/40ft container, according to a
2 March Hapag-Lloyd notice seen by Argus . 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 away from high-risk
zones 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. Impact on Latin America The conflict's immediate
effect on Latin American 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 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 imports.
As for PE, Saudi Arabia ranked third at 56,445t, while Egypt placed fifth with
nearly 47,795t. 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. Meanwhile, Brazil's 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/metric tonne ($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. Chemicals 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 Brent increase 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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