The increase in the prices of plastic raw materials, especially polyethylene (PE) and polypropylene (PP) in Iran, is always a major challenge faced by domestic suppliers, packaging manufacturers, and professional consumers. Most people think that linking the prices of these items to oil prices is what causes the high and constant price fluctuations of plastic raw materials in the market; but the reality goes beyond this and encompasses more complex and multifaceted factors.
The rise in polymer prices is not a one-dimensional phenomenon driven solely by oil prices. It is the result of a perfect storm of factors ranging from the cost of alternative feedstocks, regional overcapacity or undercapacity, logistical constraints, monetary policy, and natural demand cycles. For example, while Brent crude oil has been on a temporary decline, PP prices have continued to rise in some key markets.
In this article from Nakhl Plast, by unveiling the main causes behind the rise in plastic raw material prices which have led to sudden or sustained surges in polymer costs we provide a clear and practical framework for informed decision-making to buyers whose business survival depends on a proper understanding of the dynamics of the global polymer market.
The price of crude oil is always considered as a thermometer of the global commodity market. Petrochemical products are no exception to this rule, as crude oil, through the refining process and conversion into naphtha, provides the main feedstock for the production of most olefins (such as ethylene and propylene) in Asia and Europe. Even though this dependence is no longer a direct and linear relationship, the role of oil in determining the price of feedstocks cannot be ignored.
Brent crude oil is the global benchmark used in determining prices. naphtha plays a key role in the Asian and European markets, but the situation is quite different in North America. Polymer producers in the United States rely more on ethane and propane, which are extracted from shale natural gas. The pricing of these gaseous feeds is less dependent on geopolitical fluctuations in oil and more influenced by local gas prices and LNG export infrastructure. This dichotomy in the feedstock model is the first point of disconnect between oil prices and the final polymer price.
In early 2025, due to recent OPEC+ supply management decisions and concerns about the fragile recovery in global demand, Brent prices fell to around $65 per barrel. Based on international benchmark analyses such as the International Energy Agency (IEA) monthly reports, it was expected that this drop in oil prices would immediately lead to a reduction in the cost of polymer production; but surprisingly, this did not happen!
The reason why polymer prices did not decrease with the decline in Brent oil prices was the huge difference in the crack spread, and in particular the price difference between crude oil and naphtha. If the demand for other petroleum products, such as jet fuel or gasoline, is high at the refinery, the demand for naphtha Even if oil prices decline, it will remain strong, keeping the cost of naphtha high and putting additional pressure on the margins of olefin producers that use this feedstock. This price pressure will ultimately lead to higher polymer prices.
In the polymer production process, the cost of the feedstock is the most important variable determining the final price of the plastic raw material. Therefore, it is very important to understand these dynamics and regional differences between naphtha and ethane. While Asian producers, relying on naphtha and pressured by Chinese demand, face weak cracking margins, North American producers, relying on cheap ethane, enjoy an unrivaled cost advantage that has created a significant structural competitiveness gap, transforming the market and setting regional reference prices.
Price naphtha The Asian market, which accounts for more than half of the world’s polymer production capacity, is largely affected by demand from China’s new petrochemical complexes, so that even despite the operation of huge petrochemical projects in China in 2025, competition for naphtha supply remains high.
This, along with relatively limited supply from the Middle East and Europe, has led to the Asian naphtha trend continuing to rise despite the relative stagnation in the oil market. Cracking margins for converting naphtha into ethylene and propylene have become very weak in this region, and producers have no choice but to increase the selling price of their polymers to survive. This situation confirms that it is not only the price of crude oil, but also the actual cost of feedstock and the profit margin of olefin production that determine polymer prices.
The difference in feedstock has transformed the competitive structure of the global market. North American petrochemical complexes, relying on cheap ethane, have a high cost advantage, which allows them to export their polymers at more competitive prices to global markets, especially European and South American markets.
This is while Asian and European producers that operate on the basis of naphtha are more vulnerable to naphtha price shocks. For this reason, during periods when the price of American polymers remains stable or decreases, the price of the same polymer in Asia or Europe is affected by price jumps. naphthaThese differences determine the regional reference price, and buyers should consider these factors based on their supplier’s geographic region.
After feedstock costs, global production capacity and its utilization rate are the second-largest determinants of polymer prices. The huge surge in capacity in China has created a risk of saturation and dumping during recessions. However, any global disruption, such as periodic maintenance or hurricanes in the US Gulf, will quickly absorb the surplus and cause sharp price spikes. As a result, production stability and external risks play a central role in price fluctuations.
As the world’s largest consumer and one of the world’s largest polymer producers, China has significantly increased its PP and PE production capacity in recent years. This huge leap in capacity has presented the global market with a double-edged sword.
On the one hand, there is a risk of saturation and dumping, which, with excess supply resulting from the activity of new complexes in times of weak demand, may lead to increased export pressure on China. Therefore, Chinese producers will be forced to offer competitive prices in regional and global markets to maintain liquidity, and this will cause an adjustment in global prices.
On the other hand, there is a high sensitivity to disruption, because this vast capacity is largely dependent on the stability of production. So if a major disruption, such as unexpected repairs in the Middle East or a hurricane in the US, occurs and reduces global capacity even slightly, the resulting excess Chinese supply will be quickly absorbed and the market will immediately reverse course and face a sharp price spike.
Planning by polymer producers is very important to buyers. Periodic maintenance or planned shutdowns of petrochemical plants for equipment maintenance are an important part of the industry. Coordination or delays in these maintenance operations can lead to temporary shortages of certain grades and increase their prices.
Also, climate risks such as the hurricane season in the US Gulf, a critical region for ethane and olefin feedstock production, are always a risk for this industry, as a major storm could disrupt production and transportation infrastructure for weeks and deliver a major shock to global supply.
In recent years, freight costs have evolved from an incidental cost to a major driver of polymer final prices, driven by supply chain disruptions and rising freight rates.
Geopolitical disruptions in key trade routes such as the Red Sea and Suez Canal routes in 2024 and 2025 have disrupted global supply chains. The diversion of ships from these routes and the lengthening of the Cape of Good Hope route have led to a significant increase in container freight rates. This increase in SCFI has directly impacted the final price of imported polymer. For buyers in Europe, the Mediterranean and the US, this factor is independent of oil prices and has led to a higher price for the final product.
The shipping industry also often implements general rate increases during peak demand seasons, especially in the second half of the year. These planned rate hikes cause cyclical fluctuations and unexpected shocks to the polymer cost price; hence, buyers must consider these fluctuations as a key pricing variable to maintain their profit margins.
Macroeconomic and trade policies are the final layer of the polymer pricing puzzle. The global price of polymers is largely priced in US dollars, so fluctuations in the value of the dollar affect international purchasing power.
The relative weakness of the dollar in the first half of 2025 led to increased demand for holders of stronger currencies, which in turn led to higher dollar prices for commodities and plastic raw materials (especially for holders of weaker currencies). A stronger dollar could also make prices too expensive for weakened buyers, causing a demand slump in the market.
In addition, protectionist measures such as tariffs, trade sanctions, and anti-dumping investigations will disrupt the free and efficient flow of polymer trade. For example, as trade tensions between the United States and China escalate, tariffs on chemical products will cause Chinese products that cannot enter the U.S. market to flow into other markets, causing dumping and a temporary price drop, while the U.S. import market will face shortages and price increases. These policies will create a ripple effect across regions and disrupt price stability.
Actual market demand is the ultimate and most important short-term factor in plastic raw material price fluctuations. In the polymer market, which is affected by seasonal demand cycles, downstream industries such as food packaging, consumer goods, and construction often reach peak seasons during certain seasons, such as the second half of the year ahead of the holidays and New Year.
This seasonal demand surge is fueling a powerful phenomenon called inventory replenishment, as major buyers begin to place advance orders and fill their warehouses to ensure supplies during peak months. This simultaneous rush of demand into the market can cause short-term and sharp spikes in polymer prices, even when oil prices are stable.
In the polymers market, success cannot be achieved by simply following the price of oil, as the increase in plastic raw material prices is caused by multifaceted factors, including the oil price divergence from naphtha and ethane, China’s overcapacity pressure, logistical risks such as Red Sea disruptions, and seasonal demand cycles. So, in addition to crude oil prices, feedstock costs and profit margins of olefin production must also be considered.
To manage these fluctuations and design a resilient and successful strategy against shocks, you need to take a conscious approach. An approach that includes diversifying your supply sources, including ethane and naphtha-based sources, smart purchasing timing, and flexible contracting tools. Also, continuously monitoring critical variables such as naphtha, Asia Profitability Index, Container Freight Index (SCFI/WCI), and the status of outages in key regions will also affect your profit margin and should be considered.
Remember that only by understanding the complex interplay between feed, supply, logistics, and demand can a solid and informed purchasing strategy be designed that ensures the survival of the business against sudden shocks.
The increase in polymer prices is the result of a combination of global factors, including changing feedstock costs (naphtha and ethane), supply constraints, oil volatility, transportation costs, and monetary policies, not just oil prices.
Although crude oil is a key indicator of the energy market, polymer prices are more influenced by the actual cost of petrochemical feedstock (naphtha or ethane) and the profit margins of producers; therefore, they do not always move in line with oil.
In Asia and Europe, producers use naphtha, while in North America they use ethane. The difference in the cost and availability of these feedstocks causes price gaps between regions and differences in the final price of polymers.
China’s increase in production capacity acts like a double-edged sword: in times of recession, it causes oversupply and falling prices, but in times of global supply disruption, it will cause prices to jump rapidly on global markets.
Disruptions to routes such as the Red Sea and the Suez Canal, as well as increases in freight rates and GRI, increase the cost of transporting polymers and directly increase the final price for importers and buyers.
Because polymers are priced in dollars, changes in the value of the dollar, trade tariffs, sanctions, and anti-dumping measures can disrupt the balance of supply and demand in different regions and cause severe price fluctuations.
Downstream industries such as packaging and consumer goods have high demand in the second half of the year (before the holidays and New Year), which is accompanied by inventory rebuilding and causes seasonal price spikes.
By continuously monitoring indicators such as naphtha and ethane prices, container freight index (SCFI/WCI), the status of petrochemical outages, and diversifying supply sources, a robust and intelligent purchasing strategy can be created against market shocks.
