Raw Materials Surge 40% in a Week, Warehouses Overflow, Traffic Jams Around the Area! Direct Coverage of the Plastic Market Under Middle East Conflict

After the Israel-Hamas conflict, the temporary “shipping halt” in the Strait of Hormuz is triggering a series of “butterfly effects.” From oil to plastics, the surge in raw material prices driven by geopolitical storms has become tangible in distant Dongguan.

Dongguan Zhangmutou is an important plastic trading hub in South China and even nationwide, with an actual annual transaction volume of nearly 100 billion yuan, accounting for about one-tenth of the national market, serving as a barometer for the plastic industry across China and globally.

Recently, videos of “traffic jams at Dongguan Zhangmutou Plastic Trading Market” have gained widespread attention online. The Middle East conflict has stirred the domestic plastic market within just a few days, sparking a buying frenzy in this “China’s plastic trade hub.” Under the catalysis of the Middle East conflict, the price increase wave is transmitting from oil to plastic raw materials. This also reflects Dongguan’s key position in the global supply chain.

The plastic industry is known for the saying “Golden March and Silver April,” with prices typically rising after the Spring Festival each year. However, this year’s plastic price hikes have far exceeded the expectations of Zheng Bin, general manager of Prasis Network in Shenzhen. On the morning of March 4, the largest plastic e-commerce platform in South China saw a surge in traffic, even experiencing a temporary shutdown. Zheng Bin urgently organized technical staff to repair the system, yet inquiries continued unabated online.

“Since the Israel-U.S.-Iran conflict began on February 28, the prices of some raw materials like ABS and PC have increased by over 40%. Online inquiries have even shown a phenomenon of changing prices every hour,” Zheng Bin told Southern Finance.

On March 6, traffic congestion occurred for the sixth consecutive day on Baiguodong Road in Zhangmutou. The surrounding Baita Industrial City and Xianwei Road, where numerous plastic warehouses are located, also experienced “overcrowding.” Truck drivers arriving at Baita Industrial City from 7 a.m. waited three hours without being able to load goods. They lamented, “We haven’t seen such congestion in nearly twenty years. It feels like the spring festival rush for plastic industry workers.”

In recent days, Zheng Bin has been busy. Currently, nearly 90,000 square meters of public storage in three warehouse zones at the Zhangmutou plastic raw material market are nearly full, with storage space tight. Workers have been working overtime for several days to organize warehouses, hoping to free up more space to cope with this wave of plastic price increases.

Industry consensus is that if the Middle East conflict cannot be alleviated in the short term, plastic prices will continue to fluctuate upward. The “big traffic jam” phenomenon around Zhangmutou’s plastic raw material distribution center may persist for some time.

Volatility in the Plastic Industry Chain

“Quotes are only for the day, payment upon receipt, no oral reservations accepted.” Mr. Chen, who has been engaged in plastic trade in Dongguan Zhangmutou for over ten years, watches the fluctuating crude oil futures and petrochemical price adjustment notices on his computer screen. His phone rings nonstop as he responds loudly into the microphone while quickly revising price lists on his notebook.

Recently, many have been paying close attention to plastic price movements. The temporary “shipping halt” in the Strait of Hormuz caused by the Middle East conflict has rapidly transmitted raw material price increases from oil to plastic raw materials.

“Plastic prices like PC have risen from last year’s low of 10,000 yuan/ton to now 14,000 yuan/ton, especially after the outbreak of conflict in the Middle East on February 28, with raw material prices soaring sharply—up 40% in just a week, surpassing most people’s expectations,” Zheng Bin told Southern Finance.

Guangdong Rongshu New Materials Co., Ltd., a high-end nylon material manufacturer in Dongguan Zhangmutou, had already anticipated a rise in plastic raw material prices after the New Year. However, the sudden outbreak of the Middle East war caught them off guard.

Peng Xin, general manager of Rongshu, explained that the recent plastic price increase coincided with the Spring Festival period. The plastic PA6 and PA66 raw materials pre-ordered before the factory holiday were still en route. The international situation intensified market panic, accelerating the price rise.

A clear transmission chain has emerged: distributors hoard and raise prices, quoting multiple prices per day; traders worry about higher future prices, rushing to buy and stockpile; downstream clients, fearing continued raw material price hikes, rush to buy plastics, leading to booming transactions and warehouse overcrowding, further pushing up raw material prices.

Under international disputes, the price surge has swept from upstream raw materials to midstream materials, with industry giants raising prices intensively, exceeding expectations in scope and magnitude.

On March 1, Wanhua Chemical announced a 5%-10% price increase across its PA12 series. On March 2, Zhuhai Jinheng Biological Materials announced a 700 yuan/ton increase in PBAT resin, 500 yuan/ton in modified series, and 400 yuan/ton in masterbatch series. On March 4, global chemical giant BASF announced worldwide increases in antioxidants, processing aids, and light stabilizers for plastics, with the highest rise reaching 20%.

Zheng Bin explained that this round of “plastic price hikes” results from the interaction of internal and external factors, with recent hoarding, grabbing, and stockpiling by traders further driving raw material prices upward.

As one of the largest plastic material distribution centers in China, Dongguan Zhangmutou gathers resources from over 900 petrochemical plants in more than 60 countries and over 3,000 new material manufacturers nationwide. In 2024, the annual transaction volume of plastic raw materials in Zhangmutou is expected to reach 15 million tons, accounting for one-third of South China’s market and one-tenth of the national market, with a transaction scale exceeding 100 billion yuan. The local plastic price index has become a national market indicator.

On February 22, Zheng Bin’s Prasis Network website saw a significant increase in clicks and user activity compared to the previous year. The online warehousing section experienced a sharp rise in visits, with notable price fluctuations.

Zheng Bin explained that after the Israel-Iran conflict on February 28, plastic raw material traders quickly adopted a procurement and stockpiling mode. Prices of some raw materials like ABS and PC began to rise gradually, with upstream petrochemical plants starting to restrict supply and control volume, limiting sales. Market prices surged sharply, with increases reaching 40%, especially around the Lantern Festival, and the platform even experienced trading interruptions, which were later promptly repaired.

“In recent years, there has been a ‘one-day market’ phenomenon in the plastic industry after the Spring Festival, so the public warehouses before the holiday weren’t fully stocked. After the conflict, buyers rushed to order more from upstream petrochemical plants, driven by herd mentality, causing a surge in volume. Dongguan’s convenient transportation means raw materials can often be delivered on the same or next day, leading to concentrated inflows into Zhangmutou, causing severe traffic congestion around the market,” Zheng Bin said.

Regarding this round of plastic price increases, Zheng Bin predicts that with the ongoing tension in the Middle East, especially the potential for Strait of Hormuz blockades, the plastic industry will maintain a volatile upward trend. Short-term sharp rises may prompt some traders to take profits, as current inventories are high and downstream demand has not significantly improved, leading to a possible market stabilization.

Downstream Companies Lock in Prices and Watch for Changes

Some rejoice, others worry. In stark contrast to the high operating rates upstream in the chemical industry, downstream sectors—especially modified material manufacturers—are facing “rising raw material costs, weak demand, and squeezed profits.”

As “industrial mother materials,” plastic prices tend to pass down the supply chain step by step. Packaging, home appliances, automotive, courier, and daily necessities industries will all face varying degrees of cost pressure.

Zheng Bin explained that modified material producers are finding it difficult to procure the required raw materials amid the current market, with prices up about 30%. They must decide whether to produce and sell modified materials at old prices or buy at higher prices and sell at higher prices, considering customer acceptance. Some factories have fixed-price agreements with clients, making price adjustments impossible, which complicates matters further.

“Our factory had about a month’s inventory before the holiday to handle post-Spring Festival orders. After the holiday, we continued to pre-order raw materials. But after the Middle East conflict, PA6 and PA66 prices surged by 35%. Downstream clients, seeing this, desperately placed orders to lock in prices,” Peng Xin said helplessly.

Faced with sudden orders, Peng Xin is caught in a dilemma: accepting orders risks further price increases, while refusing might lose clients. He chose to endure the pressure by pre-ordering already increased plastics at a 20% premium to ensure factory capacity and client supply.

Peng Xin is also considering strategies: “Previous orders will be processed at inventory prices, and new orders will be negotiated with clients, with prices slightly higher than before to offset some pressure.”

Downstream companies are also observing the market. The Middle East situation remains uncertain, and plastic prices are already high—PA6 and PA66 prices have increased by about 35% in recent days, maintaining an optimistic outlook for further price rises. They are negotiating new prices with clients for upcoming orders.

Meanwhile, companies are accelerating technological innovation and R&D. “Even if prices continue to rise, we won’t stop developing new products. Only by innovating and improving core technologies can we gain an advantage in the new market competition,” Peng Xin said.

“We’ve received notices of price increases from upstream suppliers, but specific measures have not yet been implemented, and the company has not received detailed price increase plans,” said Wang Shuangzhao, assistant general manager of Dongguan Yizhiqiang Plastic Hardware Co., Ltd. The company uses a periodic ordering model, placing orders every half month, with consumption of about 30-50 tons each time. As a major user of plastics in consumer electronics, they have signed a half-year supply agreement with upstream suppliers to lock prices within a relatively stable range.

“Booking a half-year supply at once is a risk management approach. Costs are slightly higher than late last year’s market prices, but still within an acceptable range. If upstream raw material prices continue to rise, we will compare and negotiate with several suppliers from different regions to find the best deal,” Wang said.

Guangdong Wei’s New Materials Co., Ltd., a specialized enterprise in polymer new materials, produces TcPA series heat-conducting nylon and silicone-oxygenated PC products, widely used in new energy vehicles and energy storage. General Manager Long Zhixiong believes that short-term raw material price fluctuations are speculative, and long-term prices are determined by supply and demand. The current market demand has not changed significantly, and existing chemical capacity still exceeds market needs. Once circulation channels are unblocked, raw material prices will eventually fall back.

“We communicate with clients, discussing price competition and advising to reduce orders temporarily. There’s no need to take risks during market volatility,” Long Zhixiong said. Currently, the factory assesses existing inventory levels and negotiates with downstream clients, maintaining original prices within inventory scope. Any excess will be subject to market-based negotiations.

Regarding this round of plastic price hikes, Long Zhixiong admits it’s an opportunity for the company’s new product development. In a generally rising market, self-produced new materials with technological and cost advantages can more quickly enter the downstream supply chain.

(Article source: 21st Century Business Herald)