Supply Crisis Reaches Critical Point

The closure of the Strait of Hormuz has created the potential for a catastrophic supply chain crisis for Australia’s packaging industry, with plastic resin shortages escalating prices and threatening the production of packaging products for everyday consumer goods.

This includes milk bottles, food packaging, and household products such as shampoos and laundry liquids.

In an interview with ABC TV, Pact Group Chairman Raphael Geminder says the Iran conflict has disrupted the export of plastic resins made in the Middle East along with the supply of oil derivatives used to make resins in other parts of the world. Asian refineries which supply Australian packaging manufacturers have been heavily impacted by the shortage of naphtha, the primary feedstock for resin manufacturing.

This, he says, has created a “two headed monster.”

“One is a lack of supply, and as a result of a lack of supply, price has gone crazy, because everyone’s chasing a very small amount of raw material. In some resins prices have more than doubled,” Mr Geminder said.

The lead time for resin supply chains has also extended dramatically, now taking up to 105 days from Persian Gulf oil extraction to Australian manufacturers’ silos, compared to the pre-war timeframe of 30 to 40 days.

There have been instances where suppliers have invoked force majeure clauses, nullified existing contracts and demanded price increases of up to 50% on already-committed shipments.

Mr Geminder characterised the situation as unprecedented.

“Historically, we have seen periods where prices have gone through the roof or they’ve gone down. So we’ve seen lots of volatility in price, but we’ve never really seen a period where supply is constrained like it is today.”

Milk Bottle Manufacturing Under Threat

The impact on dairy-grade high-density polyethylene (HDPE) resin, the critical material for milk bottle production, has been devastating.

Prices for dairy-grade HDPE resin from Singapore surged from $916 per tonne pre-war to $1,920 in March 2026, representing a 110% increase. US-sourced dairy-grade resin climbed from $1,065 per tonne to $2,107 in April 2026, a 98% increase. These price escalations compound an already fragile supply situation.

Australia produces approximately 8 to 8.5 billion litres of milk annually, equating to about 1 billion milk and cream bottles placed on the Australian market each year.

Pact Group manufactures milk bottles and dairy containers for some of Australia’s biggest dairy producers and retailers.

“We’ve been scrambling all over the place to try and find the material. So, we’re buying from every possible source. And quite frankly, price is not an issue for us. The only thing that matters is supply,” Mr Geminder said.

“The thing that you kind of think about is what’s critical. What are the things that a country has to have? And so you start with things like food. If we take milk as an example, cows get milked every day. If you don’t have containers to put milk in, the milk goes down the drain. And then the flow on effects are catastrophic.”

With Australia producing 20 to 25 million litres of milk per day, this creates an immediate and material risk to national food security.

Industry Calls for Government Intervention

Mr Geminder said the government could utilise the expanded Export Finance Australia powers to assist with sourcing and purchasing critical plastic resins where prices have significantly increased to prevent inflated packaging costs from being passed to producers and ultimately, consumers.

“This crisis is far worse than COVID from a supply perspective. During COVID, we didn’t have a problem around supply. There was a little bit of an issue related to transport and containers, and freight prices were high. But if you compare this supply chain crisis compared to the supply chain crisis of COVID, this is far worse.”

He also emphasised the need to create sovereign capability to reduce Australia’s reliance on imported plastics and insulate the country from future global supply chain shocks.

“Practically every household in Australia has access to recycling and Australians are amazing recyclers. So, we collect all of our raw material. We’ve got really fantastic processing plants. We process all that raw material. What we don’t have is legislation that creates the demand to use that recycled material.”

Mr Geminder called on the Australian Government to accelerate promised national packaging reforms to mandate minimum recycled content levels in all packaging and prioritise the use of domestically recycled materials.

“We’re just looking for a government mandate that basically says industry will use a certain percentage of raw material depending on what grade, back in their packaging. And so we have an opportunity through legislation to create sovereign capability.”

“I think the whole of industry, for the first time in many, many years, supports the idea that we need a level playing field and wants to know what the rules are. Once we know the rules, then we can operate within that framework.”

CLICK HERE to see the interview with Raphael Geminder on ABC TV’s The Business.