Domestic Price of Plastic & Rubber Products

IBISWorld expects the domestic price of plastic and rubber products to increase by 0.9% in 2024-25, to reach 161.1 index points. Crude oil and rubber are the key inputs for plastic and rubber products. The world price of rubber is anticipated to rise in the current year, as global supply has been lower than normal due to adverse weather conditions in key production locations in Southeast Asia. However, the world price of crude oil is expected to dip in 2024-25, as global supply is expected to outweigh global demand. Rising input costs do not tend to immediately flow through to domestic rubber and plastic product prices due to the existence of multi-year supply contracts for manufacturers. However, the domestic price of plastic and rubber is expected to continue its trend of long-term growth, buoyed by higher prices in the global rubber market. While declines in the global crude oil price will limit price growth to a modest level, the continued impact of high inflation across the Australian economy will place upwards pressure on plastic and rubber product prices.

The pandemic significantly influenced the packaging industry, as self-isolation measures constrained global plastic product production in 2019-20. As a result, Australian manufacturers turned to domestic plastic product producers. Greater demand from Australian manufacturers contributed to growth in the domestic price of plastic and rubber products over 2019-20 and 2020-21. Since the end of the pandemic, strong growth in the global price of crude oil, driven by the impact of the Russia-Ukraine conflict, has flowed through to the domestic price of plastic and rubber products. As Russia is a leading supplier of crude oil, sanctions and restrictions imposed on Russia placed significant upward pressure on the world price of crude oil. Other countries have increased crude oil production to make up for these sanctions, which has caused crude oil prices to stabilise, despite still being elevated. High inflation in Australia has also driven large price increases, particularly in 2022-23, when the price of plastic and rubber products increased by 10.7%.

When the trade-weighted index rises, imports from low-cost overseas manufacturers tend to become more affordable, encouraging domestic manufacturers to cut prices. However, a climbing trade-weighted index over the past five years has done little to curb strong domestic price growth for plastic and rubber products. Despite a decline in input costs for plastic and rubber product manufacturers in 2023-24, domestic prices continued to rise, as manufacturers have been hesitant to decrease their prices in the current economy. IBISWorld forecasts the price index of plastic and rubber products to grow at a compound annual rate of 6.3% over the five years through 2024-25.