Add information on shipping at Strait of Hormuz, Red Sea and Mideast Gulf regions.
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.
