Australia’s plastic packaging manufacturers are facing a new wave of supply chain disruption, as conflict in the Middle East drives sharp increases in resin costs, freight rates, and material uncertainty – with industry leaders warning the fallout could be deeper and longer lasting than expected.
Manufacturers across the country are already reporting rapid cost increases, supply uncertainty, and mounting pressure on production planning.
Aleks Lajovic, managing director of Sydney-based tube manufacturer Impact International, says the disruption is being felt in real time. “The war in the Middle East has disrupted oil and petrochemical supply chains, and they, in turn, are disrupting our ability to manufacture our products,” Lajovic said. “From a supply chain perspective, this is Covid 2.0.”
Impact International, which manufactures tubes for food, cosmetics and pharmaceutical applications, relies on imported polyethylene resin sourced from the Middle East, Thailand and Japan.
According to Lajovic, polyethylene prices have increased by between 30 and 50 per cent within the past week, while freight costs on some routes have surged by up to 250 per cent. He said the challenge is not only cost, but a collapse in supply visibility.
“Suppliers can’t give us a price. They can’t give us a lead time. They can’t confirm delivery dates.”
With production schedules typically locked in up to 12 weeks in advance, manufacturers are being forced to commit to raw material purchases in a highly volatile market. Impact has already notified customers of a 15 per cent price rise on future orders – increases that are expected to flow through to supermarket and pharmacy shelves in the coming months. Some manufacturers expect these impacts to begin appearing at retail level within weeks, depending on existing inventory positions.
Raphael Geminder, chairman of Pact Group, a major rigid plastics manufacturer in Australia, has warned the industry should expect deeper disruption as suppliers begin invoking force majeure clauses.
“The plastic resin and recycling impact from the Middle East conflict will be significant,” Geminder said. “We are experiencing suppliers talking force majeure with associated significant price and freight dislocation. These dislocations are always sharper and longer than you expect.”
Local capacity under strain
At the same time, domestic supply is tightening. Viva Energy, now Australia’s sole producer of polypropylene, has advised customers it will increase prices and ration supply from its Geelong refinery, as it moves to maximise supply continuity for critical industries.
Polypropylene is a critical material used across packaging, healthcare and construction, meaning any constraint has immediate cross-sector implications.
The situation has also reignited concerns about Australia’s reliance on imported resin following the closure of Qenos, formerly the country’s last manufacturer of polyethylene. Industry participants in recent PKN roundtable discussions on packaging reform pointed to the loss of local resin production as a structural weakness, leaving converters more exposed to global shocks and limiting the development of a robust circular economy.
Australia’s exposure is significant. According to Australian plastic flows data published in Science Direct, around 77 per cent of virgin polymers used locally are imported, including polyethylene – the backbone of both flexible and rigid packaging.
While federal initiatives such as the Supply Chain Resilience Initiative and “Future Made in Australia” agenda have elevated the importance of domestic manufacturing capability, industry observers note that foundational materials like polymers have received comparatively little focus – leaving sectors like packaging particularly vulnerable when global supply shocks occur.
Recyclers viewpoint
However, some recyclers point out that the impact on recycled plastics may follow a different trajectory.
At the PKN roundtable on 11 March, David Finlayson, commercial manager at Martogg, said virgin PET prices had already spiked sharply in recent days, narrowing the traditional price gap between virgin and recycled material.
He said while recycled PET pricing is ultimately linked to oil-based feedstocks, in the short term it is more influenced by the availability of collected material, meaning it may remain relatively stable even as virgin prices rise.
That dynamic could create a window for recycled content to gain ground in applications typically dominated by virgin resin.
Jeroen Wassenaar, head of innovation at Cleanaway, said the duration of the disruption will be a key factor.
Reflecting on previous geopolitical shocks, he noted that short-lived conflicts tend to produce temporary price spikes that quickly normalise. This time, however, damage to production infrastructure in key Middle Eastern regions could prolong the disruption.
Planning for uncertainty
Across the sector, companies are shifting into contingency mode. In a communication to customers sighted by PKN, Caps & Closures managing director Brendon Holmes said the company is prioritising forward planning and supply visibility as conditions remain fluid.
“While the market remains fluid, our priority is clear: to stay ahead of any potential pressures and minimise disruption wherever possible,” Holmes said.
“We are actively reviewing supply positions, forward planning, and stock coverage to support reliability across our product range.”
Customers are being encouraged to engage early on forecasts and forward orders, as manufacturers attempt to manage supply risk collaboratively.
Because plastics are embedded across nearly every aspect of modern life – from food packaging and medical devices to infrastructure and housing – the implications of supply disruption are expected to be far-reaching.
“Almost 95 per cent of plastic production is oil-based,” Lajovic noted.
“Once there’s a significant disruption to oil supply, that flows directly through to plastics – and then into everyday products people rely on.”
Early signs of strain are already emerging in sectors such as construction, where materials like plastic piping are essential to housing delivery timelines. If supply constraints persist, industry sources warn that both pricing and availability impacts will become increasingly visible to consumers.
The disruption also raises questions about how Australia will meet recycled content targets if access to both virgin and recycled feedstocks becomes constrained, particularly in a system already reliant on global material flows.
For many manufacturers, the parallels with the pandemic are striking – but the pace of change is even more acute.
“At the moment, costs are moving instantaneously,” Lajovic said, noting that manufacturers are increasingly becoming “a product of their supply chain”, with limited ability to buffer against global volatility.
As global instability once again tests supply chains, the question for Australia’s plastic packaging sector is no longer whether disruption will occur – but how prepared it is when it does.
