Plastics Firms Face Profit Pressure Amid Rising Cost “Storm”

Geopolitical tensions in the Middle East are pushing the plastics industry into a difficult position, as input costs spike while financial and transportation expenses continue to rise—forcing many companies to revise their profit targets.

Input Costs Surge, Margins Under Pressure

According to a report released in late March by An Binh Securities (ABS), the conflict involving the United States, Israel, and Iran has driven global oil prices higher, pushing PVC resin prices up by around 30% since the beginning of the year.

At the same time, China’s removal of a 13% export tax rebate on PVC (effective April 1, 2026) has added further upward pressure on prices. ABS noted that these developments are likely to compress profit margins for construction plastics manufacturers.

Beyond pricing, the market is also experiencing widespread disruption across the entire supply chain. Dinh Duc Thang, Chairman of the Vietnam Plastics Association (VPA), emphasized that the impact extends beyond oil price volatility to include raw material supply chains, delivery timelines, freight costs, contract fulfillment, and production stability.

According to Thang, plastics companies are no longer dealing solely with price fluctuations, but with a fundamentally new market environment where traditional assumptions about cost, timing, and stability are being challenged.

Profit Targets Adjusted Across the Industry

These pressures are already reflected in 2026 business plans across the sector.

Tien Phong Plastics Joint Stock Company (HNX: NTP) targets revenue of over VND 7.3 trillion in 2026, up 10% year-on-year, with sales volume expected to reach 148,000 tons (+11%). However, pre-tax profit is projected at VND 900 billion—down more than 20% compared to 2025.

The company cited surging prices of key inputs such as PVC, HDPE, and PPR following the escalation of Middle East tensions in late February 2026, alongside tightening supply conditions.

By the end of March 2026:

• PVC prices had risen over 65% compared to the 2025 average
• HDPE increased by more than 69%
• PPR surged over 57%

Despite raising selling prices by approximately 25% since late March, the increase has not been sufficient to offset rising input costs, as raw materials account for up to 74.6% of total expenses.

The company also warned that further price hikes could delay construction projects due to budget adjustments, while consumer demand for plastic pipes may weaken—directly impacting revenue growth.

In addition, financial costs have surged significantly. Borrowing costs have increased by around 50% year-on-year due to interest rate volatility, while transportation costs have risen in line with fuel prices.

BMP: Resilient but Not Immune

Another industry leader, Binh Minh Plastics Joint Stock Company (HOSE: BMP), has announced its 2026 business plan with revenue of VND 6.053 trillion and net profit of VND 1.278 trillion, representing increases of 8% and 4%, respectively.

While maintaining positive growth, the targets reflect a cautious outlook with modest single-digit expansion.

According to earlier analysis by Shinhan Securities (SSV), BMP holds a notable advantage in domestic raw material sourcing. The company uses virgin resins (PVC, HDPE, PPR), with PVC accounting for approximately 81% of total material costs.

Notably, around 50% of BMP’s PVC supply is sourced from TPC Vina (part of Thailand’s SCG Group), helping ensure stable domestic supply and reduce reliance on imports. This allows BMP to maintain lower inventory levels and achieve high inventory turnover.

However, this advantage does not fully shield the company from cost volatility. SSV noted a clear inverse relationship between PVC prices and BMP’s gross margin.

During 2021–2025, declining PVC prices due to oversupply in China enabled BMP to maintain stable selling prices while flexibly adjusting discount policies to boost sales volume. As a result, gross margin improved significantly, peaking at nearly 48% in Q3 2025.

Outlook: Margin Compression Risks Ahead

In 2026, this trend has reversed. PVC prices surged to as high as $858 per ton (up around 30% year-to-date) before easing to $768 per ton in early April.

The increase has been largely cost-driven and fueled by supply disruption concerns, while actual demand remains weak due to the sluggish recovery of China’s real estate market. Additionally, Chinese PVC exports face risks from trade defense measures in India.

SSV forecasts that PVC prices may stabilize around $790 per ton in 2026. Consequently, BMP’s gross margin is likely to have peaked in 2025 and may normalize to around 41–43%, similar to levels seen in 2023–2024.

In a downside scenario, if PVC prices continue to rise due to stronger demand or supply disruptions, BMP will face further cost pressures. At the same time, if market demand remains weak or competition intensifies, the company may struggle to fully pass on these costs to customers—leading to margin compression.

Unpredictable raw material price fluctuations also complicate cost control and business planning.

Oil Prices: A Critical Variable

On a broader level, oil prices remain a key variable—not only directly impacting PVC as a petroleum-derived product, but also driving up logistics costs.

As oil prices fluctuate due to geopolitical factors or supply policies, production and transportation costs for plastics manufacturers are likely to increase significantly.

In a market where demand has yet to fully recover, the industry’s profit margins are expected to remain under dual pressure from both rising input costs and higher logistics expenses.

Hai Duong - VietnamFinance