The fragile ceasefire between the US and Iran is unlikely to offer an immediate respite to Indian plastic converters who are grappling with rising feedstock prices that are eroding their production margins.
Since the Iran war began, prices have increased by nearly 50pc, with no indication that they will decrease anytime soon.
Indian PP raffia prices were last assessed at $1,300-1,400/t cfr India on 2 April, up by $445/t or 49pc compared with $890-920/t on February 27 before the war started. Indian low-density polyethylene prices were assessed at $1,600-1,700/t cfr India on 2 April, up by $580/t or 54pc compared with $1,060-1,080/t on February 27.
Lower polymer imports from the Middle East and rising domestic prices are putting pressure on plastic converters which manufacture packaging materials among other products. And their customers, such as fast-moving consumer goods (FMCG) firms, are reluctant to accept the hike in packaging material costs, leaving them in a challenging situation.
"A large percentage of plastic converters in India are micro, small and medium enterprises, who have been hit the worst," Amit Kumar Agarwal, the President of Indian Plastics Federation (IPF), told Argus.
Even for orders that were booked before the war, suppliers are demanding surcharges amounting to hundreds of dollars per metric ton due to shipping constraints, which are adding more pressure on converters.
Middle East imports hit
The Middle East conflict has put at least of half of India's total polymer imports in jeopardy, as the Gulf Co-operation Council (GCC) countries supply most of the imports.
For 2025, the Middle East supplied around 62pc of India's polyethylene (PE) imports, or 1.41 mn t. The region also supplied 51pc of India's polypropylene (PP) imports, or 930,000 t.
The de facto closure of the strait of Hormuz has led suppliers to use Oman's East Coast ports such as Salalah and Sohar to send limited material. But overall exports from the region remain significantly reduced since the war.
The market is also sceptical about whether the ceasefire will hold and for how long.
Less than 24 hours after the announcement on Tuesday, the two sides are offering conflicting accounts of key terms of the ceasefire and of a potential peace agreement. Attacks on energy infrastructure in Iran and in neighbouring Mideast Gulf states continued in the hours after the ceasefire was announced.
Even if the conflict ends, there's no certainty on product availability as several petrochemicals production units have been hit in missile and drone attacks, Dubai-based traders said.
Petrochemical producers in the Middle East, including UAE's Borouge and Kuwait's Petrochemical Industries Company, faced drone and missile attacks on Sunday. Iranian attacks also caused fires in Saudi Arabia's Jubail — a key hub for petrochemicals.
Supply crunch goes on
In India, domestic producers have had to cut production further tightening supply. State-controlled Indian Oil, Mangalore Refinery and Petrochemicals (MRPL), HPCL-Mittal Energy, and Reliance Industries (RIL) have all cut PP output, after the Indian government asked refiners to divert propane, butene and propylene toward cooking gas production, limiting feedstock availability for petrochemicals.
"We have only passed down the higher feedstock costs partially," an official with a state-owned producer said. Several producers expect prices to stay elevated in the near-term unless the feedstock prices come down.
State-owned Opal and Gail also cut production, squeezing PE supplies.
To alleviate the pain of high feedstock prices, the Indian government slashed import duties on petrochemicals products to zero until the end of June.
But this has had little effect on offers from China, which has stepped in to fill the void left by Middle East producers, several traders said.
Following the ceasefire announcement on 9 April, some China-based traders cut their offers. But others continue to offer at high levels citing market uncertainty and high Indian domestic prices.
The IPF has written to the government to extend the import tax waiver for six months as the war could go on for a long time, Agarwal told Argus. The outcome of that petition is awaited.
Sooner or later consumer product makers will need to pass the higher costs to the end-users. The Indian consumers will likely feel the impact of rising packaging material costs from this month with producers either hiking prices or cutting volumes, Dhairyashil Patil, president of the All India Consumer Products Distributors Federation, told Argus.
