The ongoing war in Iran has disrupted shipping in the Strait of Hormuz, driving up oil-related costs and causing a significant spike in plastic prices in southern China. This has squeezed profit margins, disrupted logistics, and triggered panic buying throughout the entire supply chain in Zhangmutou, the largest plastic trading center in China.
As a result of the breakdown in nuclear negotiations, the United States and Israel launched joint military operations against Iran starting from February 28. Iran subsequently blocked the Strait of Hormuz, leading to a sharp increase in global oil prices. The strait is crucial to the world economy, transporting approximately one-fifth of the world’s oil and natural gas. On April 7, the U.S. and Iran reached a two-week ceasefire agreement and are currently in negotiations in Pakistan.
According to reports from Reuters, Peng Xin, the general manager of Guangdong Rongsu New Materials Co., Ltd., discussed the impact of the Middle East situation on Zhangmutou, stating, “The impact is quite significant. From March until now, prices have been soaring, rising by about fifty to sixty percent. And there is no sign of price increases stopping, prices are still climbing all the way, with daily increases.”
Mr. Peng mentioned that his factory’s safety stock has nearly depleted, and they are now forced to procure new raw materials at high prices, which will soon be passed on to downstream customers. He emphasized that this price pressure is also significant for downstream customers.
Plas Business Net in Shenzhen is an online trading and pricing platform for plastic raw materials widely used by traders and manufacturers in the Zhangmutou region. Zheng Bin, the market manager of the platform, explained that due to concerns that the Middle East situation may not ease in the next one or two months, companies have started hoarding inventory.
He noted that the impact of the Middle East situation on China is significant as gasoline and diesel prices have also risen, leading to an increase in transportation costs. Plastic raw material traders can only passively raise their prices. Additionally, if the Middle East situation does not ease in the next one or two months, causing anxiety among businesses, they will actively stock up. The upstream petrochemical plants, lacking crude oil and raw materials for production, will have no choice but to raise their prices passively.
The rush to purchase goods has caused warehouses and roads to become congested. Han Bing, who has managed a warehouse since 2018, stated that this year has been the busiest he has ever seen, with daily turnover doubling to around 1000 tons from the previous 500 tons. He mentioned that during the peak period, after March 5, Zhangmutou was almost in a state of traffic jam for nearly a week. The traffic jams extended for about 10 to 15 kilometers, with warehouses full to capacity, significantly impacting inbound and outbound activities.
Xiao Zejia, a merchant in the plastic market of Zhangmutou, mentioned that some upstream chemical factories have cited force majeure as a reason to refuse deliveries and honor previously signed low-price contracts, but they are still supplying orders at higher prices.
In an interview with Reuters, he said, “For me, I cannot accept this force majeure reason.”
According to a report released by the Organization for Economic Cooperation and Development in 2025, China is the world’s largest producer, consumer, and exporter of finished plastic products.