Raw materials surge 40% in one week, warehouses overflow, surrounding areas clog with traffic: On-Site Report From Dongguan’s Plastics Market Amid Middle East Conflict

After the US-Israel-Iran conflict, the temporary "suspension of navigation" in the Strait of Hormuz is triggering a series of "butterfly effects." From oil to plastic, the surge in raw material prices amid the geopolitical storm is being concretely felt in the distant Dongguan.

Changwutou, Dongguan is an important plastic trading hub in South China and even across the country, with an annual actual transaction volume of nearly 100 billion yuan, accounting for one-tenth of the national market, and has become a barometer for observing the national and even global plastic markets.

Recently, videos of "heavy traffic at the Changwutou Plastic Trading Market in Dongguan" have attracted widespread attention online. In a matter of days, the war in the Middle East has stirred up the domestic plastic market, triggering a surge in purchases in this "key hub for plastic trade in China." The price surge is spreading from oil to plastic raw materials, reflecting Dongguan's critical position in the global supply chain.

"Since the U.S.-Israel-Iran conflict on February 28, the prices of some raw materials such as ABS and PC have risen by more than 40%, and online inquiries have even seen price changes every hour," Zheng Bin told Southern Finance reporters.

On March 6th, the Bai Gu Dong section of Zhangmutou experienced traffic congestion for the sixth consecutive day. Around the Zhangmutou Plastic Market, large and small plastic warehouses in the Baida Industrial City and Xianwei Road were also "overloaded." A truck driver arrived at the Baida Industrial City at 7:00 AM and waited for three hours without being able to enter the warehouse to pick up goods. The drivers sighed, "Such congestion hasn't happened in the past 20 years. It feels like the Spring Festival travel rush for those in the plastic industry."

Recently, Zheng Bin has been extremely busy. The company's three warehouse zones at the Zhangmutou Plastic Raw Materials Market Logistics Center, totaling nearly 90,000 square meters of public storage space, are nearly at full capacity. Warehouse space is in short supply, and workers have been working overtime for several consecutive days to reorganize the warehouses, hoping to free up more room to cope with the current surge in plastic prices.

It is a widely accepted industry consensus that if the Middle East conflict cannot be eased in the short term, plastic prices will continue to rise amid volatility. In Zhangmutou, Dongguan—the hub for plastic raw materials distribution—severe traffic congestion in surrounding areas is likely to persist for some time.

Fluctuating Plastic Industry Chain

"Quotations are valid only for the day, and goods will be shipped upon receipt of payment. No verbal reservations are accepted." Mr. Chen, who has been in the plastic trading business in Zhangmutou, Dongguan for over a decade, stares at the fluctuating crude oil futures and the price adjustment notices from the petrochemical plants on his computer screen. His phone rings non-stop, as he loudly responds into the microphone, while hastily amending the price list in his notebook.

In recent days, many have been paying close attention to fluctuations in plastic prices. The temporary "suspension of navigation" in the Strait of Hormuz due to conflicts in the Middle East has quickly led to an increase in the prices of raw materials, from oil to plastic raw materials.

"The price of plastics, such as PC, has risen from the lowest of 10,000 yuan per ton last year to 14,000 yuan per ton now. Especially after the outbreak of the war in the Middle East on February 28, the price of raw materials surged, increasing by 40% in just one week, exceeding most people's expectations," Zheng Bin told Southern Finance reporter.

Guangdong Rongsu New Materials Co., Ltd., a high-end nylon material manufacturer based in Zhangmutou, Dongguan, had its General Manager Peng Xin anticipate a post-holiday increase in plastic raw material prices; however, the sudden market surge triggered by the outbreak of conflict in the Middle East was entirely unexpected.

Peng Xin explained that the recent price increase in plastics coincided with the Spring Festival holiday period. Factories had ordered PA6 and PA66 plastic raw materials before the holiday, but these shipments were still en route. Meanwhile, the international situation intensified market panic, further fueling the upward price trend.

A clear transmission chain emerges: distributors withhold inventory and drive up prices, adjusting prices several times a day; traders, fearing further price increases, rush to purchase and hoard goods; downstream customers, concerned about continued raw material price hikes, flock to plastic markets to buy urgently—resulting in brisk buying and selling, warehouse overcapacity, and further price increases for plastic raw materials.

Amid escalating international disputes, price hikes originating from upstream raw materials have swept through the midstream materials sector, with industry giants raising prices intensively—the magnitude and scope of these increases exceeding expectations.

On March 1, Wanhua Chemical announced a 5–10% price increase across its entire PA12 product line. On March 2, Zhuhai Kingfa Bio-Materials announced price hikes of RMB 700 per ton for PBAT resins, RMB 500 per ton for modified products, and RMB 400 per ton for masterbatches. On March 4, global chemical giant BASF announced global price increases for antioxidants, processing aids, and light stabilizers used in plastic applications, with maximum increases reaching 20%.

Zheng Bin introduced that this round of "plastic price surge" is the result of internal and external factors interacting, and the recent behavior of some traders holding back supplies, rushing to purchase, and stockpiling has further driven up the prices of raw materials.

As one of the largest plastic material distribution centers in the country, Zhangmutou in Dongguan gathers resources from over 900 petrochemical plants across 60 countries and more than 3,000 new material production enterprises nationwide. In 2024, the annual volume of plastic raw material transactions in Zhangmutou reached 150 million tons, accounting for 1/3 of the entire South China market and 1/10 of the national market, with a transaction scale exceeding 100 billion yuan. The local plastic price index has become a barometer for the national market.

On February 22, the website traffic and user activity of Plasway.com, managed by Zheng Bin, became active earlier than the previous year, with a significant increase in visits to the online warehousing section and notable price fluctuations.

"In recent years, there has been a 'one-day tour' phenomenon in the plastic industry after the Spring Festival, so the public warehouses were not fully stocked before the New Year. After the New Year, with the tension in the Middle East, buyers placed extra large orders with domestic upstream petrochemical plants. The herd mentality led to a sharp increase in goods in recent days. Due to its convenient transportation, Dongguan can often achieve same-day or next-day delivery of plastic raw materials, causing these goods to flood into the Zhangmutou market, resulting in severe traffic congestion around the market," said Zheng Bin.

Regarding this round of plastic price increase, Zheng Bin believes that with the continued tension in the Middle East, especially the uncertainties regarding the blockade of the Strait of Hormuz, the plastic industry will maintain a fluctuating upward trend. A short-term excessive rise may prompt some traders to take profits. Currently, the inventory in the plastic trading market is at a high level, and there is limited space for further inventory accumulation. Moreover, demand from the downstream sector has not seen significant improvement. Therefore, the market trend is expected to ease in the future.

Downstream enterprises lock in prices in advance, observing and responding with caution.

While some are happy, others are worried. In stark contrast to the high operating rates in the upstream chemical industry, downstream industries, especially modified material manufacturers, are facing a triple pressure of "rising raw material prices, weak demand, and squeezed profits."

As the “mother material” of industry, fluctuations in plastic prices will be transmitted step by step down the industrial chain. Industries such as packaging, home appliances, automobiles, express delivery, and daily necessities will all face cost pressures to varying degrees.

Zheng Bin explained that the modifier manufacturers are currently struggling to procure the required raw materials, and the price of raw materials has increased by about 30%. They need to decide whether to produce the modified materials at the original price and sell them to customers at the old price, or to purchase the raw materials at a higher price and sell them to customers at an increased price, while also considering whether customers will accept the price increase. Additionally, some factories have fixed-price agreements with their customers, making their situation more awkward after the price increase.

“We also stocked up on about one month’s worth of inventory before the Spring Festival to meet production orders after the holiday, and we began ordering raw materials progressively after the festival. We never expected that, following the outbreak of the Middle East conflict, the prices of PA6 and PA66 would surge by 35%. Seeing this, our downstream customers rushed to place orders with me to lock in prices,” Peng Xin said helplessly.

Facing a sudden surge in orders, Peng Xin found himself in a dilemma: accepting the orders worried him about further price increases, while rejecting them risked losing customers. Peng Xin chose to grit his teeth and bear the pressure, securing the already risen plastic raw materials at a 20% premium to ensure the factory's production capacity and the supply for customer orders.

Peng Xin was also considering a response strategy: "We'll fulfill previous orders based on the inventory price, and for new orders, we'll negotiate with customers to increase the price slightly to offset some of the pressure."

Regarding future market changes, downstream enterprises are currently adopting a wait-and-see stance. The Middle East situation remains uncertain, and plastic prices have already reached high levels—PA6 and PA66 prices have increased by approximately 35% overall. Prices have maintained an upward trend over the past few days, and new orders are currently under negotiation with customers for revised pricing.

On the other hand, enterprises are also accelerating technological innovation and R&D. “Even if prices rise subsequently, we will not halt the development of new products. Only by developing core technologies for new products and enhancing product competitiveness can we gain a competitive edge in the next round of market competition,” said Peng Xin.

"We have received notice of price increases from upstream suppliers, but the specific measures have not been implemented yet, and the company has not received any related price increase proposals," said Wang Shuangzhao, assistant general manager of Dongguan Zhiyi Qiang Plastics and Hardware Co., Ltd. The company adopts a periodic ordering model, placing orders every 15 days, with each order ranging from 30 to 50 tons. It is a company with relatively large plastic usage in the consumer electronics sector. To cope with this "price hike trend," the company has signed a six-month supply agreement with upstream suppliers to lock in prices within a relatively stable range.

“Ordering a six-month supply in one go is also a risky move. The cost is slightly higher than the market price at the end of last year, but remains within an acceptable and ideal range. If upstream plastic raw material prices continue to rise, we will subsequently source quotes from several suppliers across different regions, compare and negotiate with them, and select the most suitable supplier.” Wang Shuangzhao said.

“We communicate with our customers on two fronts: one is negotiating prices, and the other is advising them to temporarily reduce order volumes, as it is unnecessary to take risks during this period of market volatility,” Long Zhixiong explained. Currently, the factory is assessing its existing inventory levels and negotiating with downstream customers: prices for quantities within the inventory level will remain unchanged, while prices for quantities exceeding inventory will be subject to renegotiation based on market fluctuations.

Regarding this round of plastic price hikes, Long Zhixiong admitted that it presents an opportunity for the company to expand the market for its newly developed products. In an environment of generally rising market prices, the company’s independently produced new materials—backed by technological and cost advantages—can more quickly enter downstream customers’ supply chains.