Domestic price of plastic and rubber products

IBISWorld expects the domestic price of plastic and rubber products to increase by 1.4% in 2025-26, to reach 163.7 index points. Domestic manufacturers have faced rising wage costs, prompting them to pass on cost pressures and raise the prices of plastic and rubber products. Crude oil and rubber are the key inputs for plastic and rubber products. The world price crude oil is forecasted to dip in 2026 as global supply is expected to outweigh global demand, particularly as oil producers in South America ramp up production. Rubber prices are expected to stabilise after a sharp increase in early 2025, driven by adverse weather conditions in key Southeast Asian production regions that disrupted global supply. These factors are expected to alleviate producers' input costs in the current year. However, a dip in input costs does not tend to immediately flow through to domestic rubber and plastic product prices due to the existence of multi-year supply contracts for manufacturers. Despite a forecasted drop in input costs, domestic plastic and rubber product manufacturers are expected to demonstrate pricing inertia and be reluctant to slash prices, instead opting to preserve their margins amid fierce import competition. That's why the domestic price of plastic and rubber is expected to continue its trend of long-term growth, buoyed by higher input costs like wages and producers' tendency to maintain margins. While declines in the global rubber and crude oil prices will limit price growth to a modest level, the continued impact of high cost pressures 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. While plastic production rebounded in 2020-21, supply chain disruptions prompted many manufacturers to source from domestic producers to build supply chain resilience. These factors fuelled greater demand from Australian manufacturers, contributing to growth in the domestic price of plastic and rubber products in 2020-21. In 2021-22, 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 in 2022-23. High inflation in Australia has also driven large price increases, particularly in 2022-23, when the price of plastic and rubber products soared by 10.7%. As global supply conditions normalised and improved, input price pressures have eased over the three years through 2025-26, including a notable drop in 2023-24. The normalisation in manufacturers' input expenses has offset further price increases for rubber and plastic products. When the trade-weighted index rises, imports from low-cost overseas manufacturers tend to become more affordable, encouraging domestic manufacturers to cut prices. A dip in the trade-weighted index over the past five years has contributed to the 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 to remain viable. IBISWorld forecasts the price index of plastic and rubber products to grow at a compound annual rate of 5.8% over the five years through 2025-26.