Bangladesh’s plastic industry is encountering significant challenges due to the ongoing conflict between the US, Israel, and Iran, leading to disruptions in global energy and petrochemical markets, according to industry experts. The tightening supply of raw materials, with oil flows and crucial shipping routes like the Strait of Hormuz being impacted, has caused alarm among manufacturers in the country. Concerns are rising as stocks may only last a few weeks, potentially resulting in production cuts, price hikes, and export pressures.
The cost of resin, a vital raw material for plastics, has soared from $900-$950 per tonne to $1,500-$1,600 per tonne, driven by a surge in crude oil prices from $60-$70 per barrel to $115-$120. This sharp increase in production costs is putting immense pressure on factories, with some facing the possibility of shutdown within a matter of days if supplies are not replenished.
Anisur Rahman, deputy executive director of Premiaflex Plastics Limited under ACI PLC, highlighted the urgency of the situation, noting that while some companies have limited stock for a week or two, the overall outlook remains uncertain. The industry is grappling with a supply shortage rather than just cost issues, as even offering higher prices to suppliers has not guaranteed deliveries.
To navigate the crisis, manufacturers are prioritizing the production of select items aimed at customers willing to accept higher prices. However, challenges persist with difficulties in opening and adjusting letters of credit, leading to delays and revised terms from suppliers. Prices of key packaging material LLDPE have surged from $1,900 to $2,100-$2,200 per tonne due to the conflict in the Middle East, exacerbating the supply chain disruptions.
Rahman expressed concerns about potential widespread shutdowns if stability is not restored soon. The strain is widespread across the market, as echoed by RN Paul, managing director of RFL, who anticipates operating challenges within the next two weeks due to existing inventory constraints and escalating raw material prices.
RFL, which requires around 10,000 tonnes of raw materials monthly, has witnessed significant price hikes across materials like PET, polypropylene (PP), and PVC. The price of PVC, used in pipe manufacturing, has doubled to around $1,600 per tonne. Global supply dynamics have shifted, with the company sourcing the majority of materials from the Middle East and China.
The situation has been further complicated by partial deliveries despite opening LCs, leading to reduced market activity and operational uncertainties. ASM Kamal Uddin, managing director of Luna Polymer, attributed the crisis in the plastic manufacturing sector to tax complexities, banking issues, and global supply disruptions, emphasizing the urgent need for policy support to stabilize the industry.
Shamim Ahmed, president of the Bangladesh Plastic Goods Manufacturers and Exporters Association (BPGMEA), highlighted the critical role of the plastic sector in supporting various industries. He underscored the need for reduced import duties on raw materials to alleviate the pressure on manufacturers and ensure sector stability. Ahmed called for immediate government intervention to address the challenges faced by the industry and prevent further economic strain.
