This article first appeared in The Edge Malaysia Weekly on May 4, 2026 - May 10, 2026

PLASTIC packaging manufacturers are back in focus as concerns mount over tightening raw material supply.

Disruptions in the Middle East, driven by escalating tensions following US-Israel strikes on Iran and the blockage of the Strait of Hormuz, have constrained the availability of key feedstocks such as crude oil and natural gas. This has, in turn, affected the supply of resin, a critical derivative used in the production of plastic packaging.

The supply crunch has driven resin prices up an average of 80% in recent months, tracking gains in crude oil. For producers with sufficient inventory and diversified sourcing, the environment may prove beneficial, given that the industry operates on a cost-plus pricing model.

“Our industry generally operates on a cost-plus pricing basis, and we continue to be vigilant in our cost pass-through mechanism. In many end-products, packaging material represents only a small portion of the total product cost, which helps support customer acceptance of reasonable price adjustments,” one manufacturer tells The Edge.

He says margin management now hinges on pricing discipline, operational efficiency and close collaboration with customers.

With supply tight and prices escalating, some have questioned why manufacturers have not then turned to recycled resin instead of virgin resin, given that the price gap between the two would have narrowed.

While recycled resin comes in several types, resin manufacturers point out that closed-loop chemically recycled resin that is derived from post-consumer recycled plastic products, is generally three to six times more costly than virgin resin owing to scarcity.

“A sudden price shock in virgin resin may make recycled resin seem competitive in the short term. However, the more important consideration is that all packaging materials must continue to meet food safety standards and stringent packaging performance requirements,” says another manufacturer.

He adds that challenges surrounding recycled resin include inconsistent quality, limited availability, technological constraints and high production costs. These factors have dampened adoption, particularly for food-grade applications.

A resin producer also says that given the relatively low selling prices of plastic products, the higher production costs associated with recycled resin makes it less economically attractive.

“As a result, even multinational companies such as Nestlé and Unilever have recently scaled back the pace of their initiatives that are driven by ESG (environmental, social and governance) as well as their demand for these higher-cost materials,” the resin manufacturer notes.

Locally, plastic packaging manufacturers do have some products made from recycled resin. But it is a niche market and makes up below 10% of their total resin usage.

Having said that, most plastic packaging manufacturers are estimated to have between two and three months of raw material inventories.

With inventories bought at a cheaper level earlier but sold at higher cost-plus prices now, Kenanga Research says in its April 21 report that the industry could enjoy higher profits for one to two quarters.

Furthermore, the increase in order volumes with customers rushing to buy in anticipation of further price increases is also likely to add to the industry’s profitability in the near term.

Industry players say even if geopolitical tensions ease, normalisation could take months or even years, given the extent of disruptions to oil refineries and petrochemical facilities in the Middle East.

Kenanga Research notes that some plastic packaging producers have started seeing new customers approaching them for orders after facing force majeure from their existing suppliers. The research firm views the current energy crisis as a potential inflection point for established players who are financially strong.

“We gathered that the plastic packaging players under our coverage did not face major supply interruptions thanks to well-­diversified sources across the US, Asia and the Middle East, supported by long-standing relationships and a healthy cash position,” it adds.

Market sentiment has turned more positive. Shares of major plastic packaging companies have gained momentum after a period of weak earnings.

Among the four larger plastic packaging manufacturers, the share price of Thong Guan Industries Bhd (KL:TGUAN), which had been flat for the first two months of 2026, started gaining momentum in early March, climbing to RM1.34 on April 20 from RM1.16 on March 4.

The rally gained more legs after Kenanga Research upgraded the sector from “neutral” to “overweight” in its April 21 report. Between April 20 and 27, the stock climbed rapidly by 21.6% to RM1.63. Last Thursday, it closed at RM1.60, valuing the company at RM626.14 million.

Kenanga Research has four stocks in the sector under its coverage, being BP Plastics Holding Bhd (KL:BPPLAS), Scientex Bhd (KL:SCIENTX), SLP Resources Bhd (KL:SLP) and Thong Guan. Notably, it is one of the few research houses covering the plastic packaging industry extensively.

Similar trends can be observed across BP Plastics and Scientex. Both stocks started to gain momentum on March 30, with BP Plastics having gained about 41% to a year-to-date high of 86 sen on April 27 while Scientex increased 10.7% to close at RM3.71 on the same date. Last Thursday, Scientex closed at RM3.78, with a market cap of RM5.87 billion, while BP Plastics closed at 84.5 sen, valuing the company at RM236.4 million.

As for SLP Resources, the noticeable rise took place after Kenanga Research’s sector upgrade on April 21 as it climbed 10.52% to close at 84 sen on April 28. Kenanga Research has a target price of 90 sen on the stock and says it is “cautiously optimistic” on the company due to the potential impact from the recent reduced tourist arrivals in Japan. SLP Resources derives about 40% of its revenue from the Japanese market.

Kenanga Research’s top picks include Thong Guan which it likes for its growth momentum in the food and beverage segment as well as its aggressive push into overseas markets with environmentally friendly, high-performing products. It has a target price of RM1.73 on the stock.

It also likes BP Plastics, which it has set a target price of 87 sen, for its success in securing several reputable bread brands in Malaysia as well as for its ability to pass through higher resin costs underpinned by its quality stretch films-centric business model.

As for Scientex, which derives half of its revenue from its packaging segment and the remaining from property development, Kenanga Research says it remains positive on the company for its growing property development performance and more resilient packaging segment compared to its peers, backed by a well-diversified product range.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.