The ongoing fallout from the Iran War is beginning to reshape Asia’s plastics landscape, with the region’s recycling sector facing mounting energy and freight cost pressures and uncertainty despite a welcome surge in demand for recycled plastic, market watchers say.
The conflict has pushed up oil prices and affected the global petrochemicals value chain – the blocking of the Strait of Hormuz has choked supplies of naphtha, a key feedstock for plastics production – which has lowered the price difference between virgin and recycled plastics, which are more expensive.
The price spread between virgin and recycled polyethylene terephthalate (PET) has narrowed to around US$200 per tonne, down from over $400 per tonne in previous years, as recyclers report a surge in demand in the wake of the Middle East oil crisis.
Rob Kaplan, chief executive of Circulate Capital, which invests in recycling firms in South and Southeast Asia, said his portfolio companies had seen a “huge” increase in demand for recycled plastic as buyers scramble to lock in supply.
“It’s not just about pricing, it’s availability,” said Kaplan. “With oil prices going up and choke points [in the Strait of Hormuz] reducing access to the building blocks for virgin plastic, there has been a significant increase in demand for recycled plastic.”
Virgin plastic prices have spiked since the breakout of the Iran war, increasing the competitiveness of recycled plastic. Source: S&P Global Energy / unit: $/mt
Ganesha Ecosphere, a recycled plastic firm in India, said this week it was supplying bumper volumes of recycled resin to companies looking for a replacement to virgin plastic amid a supply squeeze.
A higher oil price can improve the competitiveness of recycled resin versus virgin – but only to a point.
Alvaro Aguilar, head of operations, Prevented Ocean Plastic
Recycled plastic markets have struggled in recent years, undercut by a prolonged period of cheap virgin resin.
The trade war instigated by the Trump administration in early 2025 contributed to a drop in oil prices, further eroding the competitiveness of plastics recovered from the environment for recycling.
Kaplan noted that low oil prices over the past six months have meant that recyclers have a lot of inventory, which is now being cleared, although there are rumours that collection networks are hoarding material to keep prices high.
The demand squeeze has placed growing pressure on the informal waste collection sector, which is responsible for recovering the vast majority of the region’s post-consumer plastic.
“Feedstock supply cannot be increased overnight, as it depends largely on the informal sector. This creates a lag between rising offtake demand and the ability to secure sufficient feedstock to meet that demand,” Kaplan said.
Alvaro Aguilar, head of operations for Bali-based recycler Prevented Ocean Plastic, said PET bottle collection and local fundamentals are relatively stable in Indonesia, however logistics friction and margin pressure are building across the value chain as the crisis drags on.
“Higher oil prices can improve the competitiveness of recycled resin versus virgin, but only to a point – if volatility persists, many buyers slow down commitments and wait for clearer pricing direction,” he said.
“The main effects [of the Iran war] are coming through three channels at once – higher fuel costs, more volatile ocean freight, and more cautious procurement behaviour,” Aguilar said.
The major buyers of recycled plastic are multinational brands with commitments to use more recycled material in their packaging, such as Coca-Cola, Unilever and Danone.
Recycled plastic – a hedge against supply shocks
Recycled plastic should present buyers with greater stability and lower exposure to external shocks, Aguilar said.
“In that sense, recycling acts more as a supply chain hedge than just a pricing alternative,” he said.
However, despite the shifting market dynamics, procurement teams have yet to adjust their strategies in a way that see recycled plastic as a buffer against supply shocks.
Most continue to operate on a “just-in-time” basis, prioritising short-term price optimisation over supply security, he said.
Aguilar argues that recycled materials should be evaluated not only on cost, but as a risk-managed supply option.
Regional recycling supply chains offer advantages such as reduced exposure to energy price swings, fewer dependencies on long-distance shipping, and insulation from export restrictions or feedstock disruptions.
While some early adopters are beginning to integrate these considerations into sourcing strategies, Aguilar said the broader market has been slow to adapt.
“The recycling supply chain can actually offer more predictability in this global context,” he said. “But buyers need to adjust how they evaluate risk and sourcing strategies to fully capture that value.”
The plastic supply crunch has also led to an increase in demand for reusables in some jurisdictions, with the Taiwan government pushing to promote reuse schemes after disruptions to petrochemical feedstocks triggered panic buying.
