Iran War Is a Sudden Boon for US Plastic Makers
AP Photo/Ted Shaffrey, File
A surge in global tensions has suddenly transformed a previously sluggish part of the U.S. manufacturing sector. According to reporting by John Keilman in the Wall Street Journal, the conflict involving Iran and Tehran’s decision to block the Strait of Hormuz have unexpectedly boosted American plastics and chemical companies, making them some of the strongest performers in the market.
Major firms such as Dow and LyondellBasell have benefited the most. With producers in the Middle East cutting back output and many European and Asian plants losing access to crude oil from the Persian Gulf, prices for key plastics—including polyethylene and polypropylene—have climbed rapidly. One longtime industry analyst said the speed of the increase is unlike anything he has seen before.
Dow has already implemented several price increases for polyethylene in just a matter of weeks and is operating its large “cracker” facilities at nearly full capacity. The company’s stock has risen about 77 percent this year. LyondellBasell has seen even stronger gains, with its stock climbing roughly 84 percent over the same period.
While U.S. producers are enjoying a boom, the situation is creating challenges for companies that rely on plastic resin as a raw material. Businesses that manufacture packaging, toys, and other plastic products are facing rising costs. CNN reports that those higher expenses are likely to reach consumers, potentially driving up the price of everyday items and even automobiles.
Economist Joseph Foudy of New York University notes that manufacturers have limited options to replace plastics with other materials, making it difficult to avoid the cost increases.
Industry analysts say the advantage for U.S. chemical producers may last for a year or two. Over time, however, increased global competition in ethane production could narrow the gap and reduce the current edge American companies are experiencing.
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