The escalating Iran–US–Israel conflict has created a crisis in the petrochemical supply chain. Threats to the Strait of Hormuz have driven crude oil toward $120 per barrel, triggering a “fear premium” that has sent polymer prices skyrocketing by 68% to 78% since February 2026.
HDPE and LLDPE prices have surged to approximately ₹1.34 lakh per tonne, while Polypropylene (PP) has reached a record ₹1.46 lakh per tonne — figures that industry veterans describe as unprecedented in the domestic market. The combination of a crude-driven “fear premium” and tightening global supply has created a perfect storm for downstream plastic processors across India.
The All India Plastics Manufacturers Association (AIPMA) and the Gujarat State Plastic Manufacturers’ Association (GSPMA) have jointly warned that over 50% of MSME plastic units have already been forced to halt or severely curtail production. The primary culprits: unsustainable raw material costs and a severe liquidity crunch as banks tighten credit lines to a sector under stress.
Industry sources indicate that processors with long-term supply contracts have been partially shielded, but spot-market buyers who make up the bulk of India’s fragmented MSME plastic sector are bearing the full brunt of the crisis. Working capital cycles have stretched from 45 to 90+ days as processors struggle to pass on cost increases to brand owners and FMCG customers.
AIPMA has called an emergency council meeting and issued formal communications to the Ministry of Chemicals and Petrochemicals, demanding a GST reduction from 18% to 10% on polymers, a 20% enhancement in working capital limits for plastic processors, and stringent anti-dumping measures against low-cost Chinese imports flooding the market during the crisis period.
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