US plastic manufacturers reap gains as Iran conflict chokes global supply chains

US plastic manufacturers are experiencing a period of historic growth as the conflict involving Iran strains petrochemical supply chains, particularly across Asia.

Petrochemical producers in Asia, the Ortadoğu, and Europe have been adversely affected by the war, which has resulted in the near-total closure of the Strait of Hormuz. In contrast, American chemical companies—leveraging cheap natural gas and operating without dependence on the Strait—are benefiting from newfound strategic importance and surging revenues.

Demand for polyethylene, a soft and flexible material used in sandwich bags, detergent bottles, food service gloves, and various other products, has proven particularly lucrative for US firms. Jim Fitterling, CEO of Dow Chemical, commented on the company’s domestic production capacity, stating, “Everything that is operational will be running at full capacity for the remainder of the year.” Dow also implemented a price increase of 30 cents per pound for polyethylene this month.

In addition to polyethylene, the market for polypropylene is bolstering US-based production. Polypropylene is a harder, denser substance utilized in automotive parts, takeout containers, bottle caps, and medical supplies.

Agustin Izquierdo, CFO of LyondellBasell, a Houston-based multinational, recently told investors: “Material from the Ortadoğu is trapped in the region, which presents an opportunity for North America to begin exporting polypropylene.” According to the Wall Street Journal, the company’s shares have gained 84% so far this year following a two-year decline.

However, the broader US economy views these developments with less enthusiasm. The cost of doing business is rising for companies that manufacture plastic consumer goods or rely heavily on plastic packaging.

Jay Foreman, CEO of toy manufacturer Basic Fun!, told the Wall Street Journal: “In the short term, we will take the hit, but undoubtedly this will affect consumers at some point.”

Analysts indicate that even if the Strait of Hormuz were to reopen immediately, it could take up to nine months for the shipping and production of petrochemicals to return to normal levels. Even then, critical sectors such as fertilizer production would likely be prioritized for replenishment, according to the WSJ.