Page 11 - Plastics News September 2026

FROM THE EDITOR'S PEN

Plastic MSMEs Caught in a Maritime Supply Chain Squeeze
The geopolitical turmoil around the Strait of Hormuz and the Red Sea is no longer a
distant maritime crisis. For India’s plastic industry, particularly its thousands of MSME
processors, converters and exporters, the disruption has become a direct business
challenge.
Plastic manufacturing is closely tied to petrochemical supply chains. India imports a
significant volume of polymers and feedstocks, including polyethylene, polypropylene
and PVC. Around 8–9 million tonnes of polymers are imported annually, with roughly
three million tonnes coming from the Gulf region, according to industry estimates
reported earlier this year.
The disruption of shipping through Hormuz has therefore created a double squeeze:
raw materials are becoming more expensive while moving them has become more
difficult and costly. The Middle East accounts for about 15% of global polyethylene
capacity and 9% of polypropylene capacity, making the region particularly important
to global polymer supply.
For MSMEs, the impact is disproportionately severe. Larger companies can maintain
inventories, negotiate alternative supplies and absorb temporary cost increases. A
small processor operating on thin margins has little such flexibility. Industry reports
earlier this year indicated polymer prices rising sharply, with some grades increasing
by as much as 70%, while several plastic-processing units reduced or halted
production.
The Red Sea disruption adds another layer of uncertainty. Rerouting vessels
around longer routes increases sailing time, freight, insurance and working-capital
requirements. The Government itself has acknowledged that geopolitical disruptions
have resulted in vessel diversions, longer sailing routes, congestion and conflict-
related surcharges.
For a small plastic manufacturer, every additional cost matters. Resin purchased
at a higher price has to be converted, transported and sold, often against orders
negotiated weeks earlier. Passing the entire increase to customers is rarely possible,
particularly in highly competitive segments such as packaging, household products,
pipes, films and components. The result can be shrinking margins, delayed production,
cancelled orders and, in extreme cases, temporary closure.
Exports face a similar problem. Higher freight and insurance costs can erode the
price advantage of Indian manufacturers in overseas markets. Longer transit times
also make delivery commitments harder to maintain.

The Government has introduced measures such as RELIEF (Resilience and Logistics
Intervention for Export Facilitation) providing enhanced risk coverage, premium
stability and support for eligible MSME exporters facing extraordinary logistics-
related costs. But the immediate crisis also exposes a deeper structural issue:
resilience cannot depend entirely on emergency measures.
India’s plastic industry needs diversified sources of polymers and feedstocks,
stronger domestic petrochemical capacity, better inventory planning, alternative
shipping corridors and more accessible working capital for MSMEs.

The Hormuz and Red Sea disruptions have demonstrated a hard lesson; in today’s
plastic industry, supply-chain security is as important as production efficiency. For
MSMEs, building that resilience is no longer a long-term option. It is becoming a
condition for survival.
Rajiv B. Tolat
Hon. Editor
publication@aipma.net

September 2026 PLASTICS NEWS 11