BofA: Plastic prices surge as Iran conflict disrupts petrochemical supply

Investing.com -- Petrochemical markets including ethylene, propylene and their derivatives have spiked following disruptions caused by the Iran war, according to Bank of America. The closure of the Strait of Hormuz has curtailed operations at Middle Eastern petrochemical facilities, which represent the world's third-largest capacity for these materials after China and the United States.

More than half of Middle East petrochemical capacity has reported damage from attacks during the conflict. Operations at these facilities have been halted due to insufficient shipping capacity through the Strait of Hormuz to transport their chemical output, despite the plants using domestic resources as feedstocks.

Asia, which accounts for nearly half of global ethylene capacity and about 60% of propylene capacity, has seen utilization rates drop below 70% as facilities reduce operations or shut down. Some countries in the region are operating below 60% capacity, compared to the 80% threshold typically considered economically viable. The region depends on feedstock imports to maintain operations.

China has maintained better performance than other Asian countries by drawing on its oil stockpiles, though its Iranian condensate and liquids supply faces potential disruption.

European petrochemical utilization rates have declined approximately 3% from pre-conflict levels. Limited clean tanker capacity has made it difficult to redirect naphtha shipments from Europe to Asia.

United States petrochemical facilities are operating at their highest capacity since 2021, benefiting from domestic feedstock resources. However, export capacity constraints limit the ability of domestic ethane and ethylene to reach global markets.

Polyethylene and polypropylene margins in the US and Europe have increased since the conflict began, while Asian producers face challenges. The Strait of Hormuz has been closed for over two months. Bank of America expects elevated petrochemical margins to continue until at least year-end as the industry works to recover from the disruption.

You May Also Be Interested In

• Trump: everybody is fully aware that Iran will agree to have major weapons inspections in order to ensure "nuclear honesty" long into future
• Ruanyun Edai Technology (RYET) files for 20M share offering by selling stockholders
• Chinese carmakers exploring Canada’s EV import quota, Joly says