- Brent nears $87/bbl as renewed Middle East tensions disrupt energy markets
- Higher naphtha, ethylene and benzene prices raise replacement costs across polymers
- Producers expected to review resin prices, although weak downstream demand may limit pass-through
Global crude oil prices rallied sharply on Tuesday, pushing Brent crude to $86.90/bbl (+4.31%) and WTI to $81.00/bbl (+3.86%), as renewed geopolitical tensions between the US and Iran heightened concerns over crude and petrochemical trade through the Strait of Hormuz. The rally follows tighter restrictions on Iranian shipping, proposals for higher transit charges on vessels using the strategic waterway, and renewed discussions on sanctions targeting buyers of Russian energy.
The immediate impact has been felt across the petrochemical chain. Naphtha, ethylene and benzene all moved higher alongside crude, increasing replacement costs for polymer producers. At the same time, the depreciation of the Indian rupee is raising the landed cost of imported feedstocks and finished polymers, adding further pressure on domestic production costs. While buying activity remains largely need-based, market participants expect producers to review resin prices if feedstock costs remain elevated.
Market snapshot (14 July)
Higher feedstock costs ripple through the polymer chain
The recent surge in crude prices has quickly filtered into key petrochemical feedstocks.
Naphtha, the primary feedstock for steam crackers, rose 3.39%, while ethylene gained 4.85% and benzene increased 4.06%, lifting production costs across polyethylene (PE), polypropylene (PP), PVC, PET and other commodity polymers.
Higher crude prices are also expected to increase bunker fuel costs, freight rates and marine insurance premiums, further raising the landed cost of imported feedstocks and finished polymer cargoes. If tensions in the Middle East persist, producers may face sustained cost inflation across the value chain.
Demand remains cautious despite rising costs
Although upstream costs have increased sharply, downstream demand remains subdued.
In India, converters continue purchasing largely against immediate requirements, avoiding inventory build-up amid uncertain price direction. This cautious procurement pattern is likely to slow the pass-through of higher feedstock costs into finished polymer prices.
Globally, demand also remains mixed. China’s June crude imports reportedly fell 41.3%, the lowest level in almost a decade, reflecting weaker refinery operating rates and subdued industrial demand.
Trade flows face renewed logistics risks
Beyond feedstock inflation, logistics have once again emerged as a key concern.
The Strait of Hormuz handles around 20% of global crude oil and LNG trade, making any disruption significant for energy and petrochemical supply chains. Reduced tanker movements through the region have raised concerns over longer transit times, higher freight charges, increased marine insurance premiums, and higher import costs for Asian polymer buyers.
For India, the weaker rupee further amplifies these pressures by increasing the cost of imported crude, feedstocks and polymer resins.
PET market reacts first
Among polymers, PET is already showing early signs of a cost-driven response.
Market participants expect virgin PET prices to increase by around INR 1.5-2/kg, while major domestic producers have withdrawn price protection from 14 July, signalling expectations of higher replacement costs.
In contrast, recycled PET (rPET) prices have remained broadly stable, with recyclers waiting for clearer direction in virgin resin prices before announcing revisions.
Trade flows have also started adjusting following India’s anti-dumping duty on Chinese PET. Market participants indicated that Chinese cargoes are increasingly being diverted to Vietnam, where prices are heard at $970-1,050/t, while Vietnamese-origin PET offers into India are around $1,150/t.
Despite these developments, oversupply continues to weigh on the PET market, keeping procurement largely need-based.
Market sentiment
Sentiment has turned cautiously bullish from a cost perspective but remains restrained by weak demand.
Most participants expect higher producer offers if elevated crude and feedstock prices persist. However, comfortable inventories, ample product availability and subdued downstream consumption continue to discourage speculative buying.
As a result, converters are expected to continue with need-based procurement until clearer pricing trends emerge.
Outlook
The direction of polymer prices will largely depend on whether the recent rise in crude oil proves temporary or develops into a sustained cost cycle.
If Brent crude remains above $85/bbl and disruptions around the Strait of Hormuz continue, higher naphtha and petrochemical feedstock costs are likely to support further producer price revisions across commodity polymers.
However, the pace of any increase may be constrained by oversupply in several polymer segments, cautious converter buying and weak downstream demand. Over the coming weeks, market participants will closely track crude oil prices, feedstock movements, freight costs, the USD/INR exchange rate, and producer announcements to assess whether higher production costs translate into sustained polymer price increases.
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