Rising oil prices may lead to costlier plastics - Increase in prices of petrochems, which are raw materials for plastics, will hurt manufacturers, say industry sources

straitstimes.asia1.com.sg By Kelvin Wong

THE next time you request takeaway from your favourite mee pok stall, do not be surprised if you have to pay more than the usual 20 cent surcharge for the plastic container.

In an unexpected twist, plastics have become the latest victim of global oil price hikes in recent months arising from fears of an impending war in Iraq and political unrest in Venezuela.

According to the Singapore Plastic Industry Association (Spia), the prices of petrochemicals - essential raw materials for plastics - have surged by about 25 to 30 per cent in the last five months.

Plastic resins, which are broadly classified as petrochemicals, are themselves obtained from the refinement of crude oil.

'The prices of petrochemical products are very much related to crude oil prices,' Spia president Ronald Lim told The Straits Times yesterday.

'With the sharp increase in raw material prices, some manufacturers are having to absorb this extra cost and are hurting as a result,' he added.

The price of crude oil hit a two-year high last Thursday at US$39.99 a barrel.

Prices have been climbing steadily since mid-November last year when they hovered around US$25 a barrel.

The prices of plastic resins - which are used to make everyday household plastic items such as trash bags - have also moved in tandem.

For example, the price of PVC (polyvinyl chloride), which is used for trunkings that conceal electrical wires, rose from US$550 (S$955) per tonne in October last year to US$710 per tonne last month, Spia data showed.

The price of high density polyethylene, a plastic resin used in ordinary shopping bags rose from US$570 in October last year to US$760 per tonne this month.

Similarly, the price of polypropylene - commonly used in products such as food bottles and automobile battery casings - surged from US$660 to US$860 per tonne over the same period.

Would this translate into higher prices of plastic end-products?

Said Mr Lim: 'If prices of plastic resins continue to rise, then plastic products are likely to follow.'

Plastic manufacturers contacted yesterday agreed that the price hikes have hit them hard.

'We have been trying to absorb the increases so far but from this month onwards, we would probably have to raise our prices,' said Mr Toh Cheng Wan, managing director of Chuan Durn Plastic Industries.

The company manufactures shopping and trash bags, as well as plastic sheets for packaging.