Thai plastics crisis puts SME factories at risk as costs surge

Thailand’s plastics industry is facing a crisis on several fronts, as the cost of key resin raw materials has surged by nearly 100% in a short period, adding pressure to consumer goods and packaging prices through cost-push inflation.

Small and medium-sized enterprises (SMEs) are also at risk of shutting down as early as May 2026, due to tight liquidity and price dumping by Chinese products.

Sanan Angubolkul, chairman of Srithai Superware Public Company Limited, said resin prices had jumped by 60-90% as a result of the Iran war, severely affecting production costs for consumer goods and packaging.

He said tensions in the Middle East remained fragile, especially the security risk along shipping routes through the Strait of Hormuz, which had pushed up marine insurance costs and freight rates while making shipping times more uncertain.

He said the surge in resin costs had forced manufacturers to raise product prices.

With raw material costs up by 90%, finished goods prices had risen by about 70% on average to reflect higher resin, transport and packaging costs across the system.

“At present, we have shifted to a back-to-back system, quoting prices week by week to prevent risk. If global oil prices or international policies change suddenly, manufacturers will not be hurt by holding expensive stock, and this also helps prevent risks from speculation and volatility,” Sanan said.

Sanan said the most worrying group was the country’s more than 3,300 small and medium-sized factories.

Resin sellers were now prioritising large regular customers, leaving SMEs struggling to secure supply.

Businesses that previously received credit terms now had to pay cash immediately, while most SMEs were already facing liquidity shortages.

He added that many Thai SMEs still used old machinery that consumed large amounts of electricity and operated slowly, leaving them with higher costs per unit than their competitors.

If the situation does not ease by May, he warned that the plastics industry could face permanent production shutdowns, shorter working hours and widespread layoffs.

Sanan also pointed to the influx of plastic products from China, which he said were being dumped in Thailand after China was hit by the trade war with the United States and could no longer export as much to the US.

Chinese producers had instead turned to ASEAN markets.

He said the most worrying factor was the Chinese government’s 13% export tax rebate, which allowed Chinese products to be sold below their real cost, while Thai SMEs had no support and had to shoulder all costs themselves.

The competition, he said, was like “a small player fighting a giant armed with every weapon”.

He proposed urgent measures, including taxation and tighter control over outbound money transfers linked to cross-border online purchases, as well as the immediate use of tax measures and surcharges when imported goods are found to be priced below their real cost.

He also called for mandatory standards for all plastic products and strict law enforcement to block low-quality foreign goods.

Sanan also backed the installation of solar roof systems to reduce energy costs, an old machinery replacement programme to raise SME productivity, and oversight from the Bank of Thailand.

He said the central bank should supervise payment transactions through foreign platforms to prevent trade disadvantages and control capital outflows.

Saran Srimanoch, managing director of Grand Polymers Inter Co., Ltd., said Thailand’s plastics industry was worth more than THB1.3 trillion, accounting for 14.4% of national GDP, making it one of the country’s key industries.

Tensions around the Strait of Hormuz had affected Thailand’s petrochemical supply chain, which supports more than 3,300 factories still in operation.

He said large operators still had enough stock for two to three months, meaning there was no immediate shortage in the short term.

However, medium-sized and small operators were becoming a concern, especially SMEs facing constraints in working capital and storage space.

If the situation drags on, they are likely to be hit first, and the impact will not be limited to resin costs but could spread to downstream manufacturers and Thailand’s export sector.

Saran said the Middle East war had made transport through the Strait of Hormuz impossible, forcing shipments to reroute around the Cape of Good Hope.

This had caused freight costs to triple and pushed up average production costs by 60-90%.

Plastic raw materials in the Polyolefin group, including PE, PET and PP, have seen sharp price increases, with resin prices rising from THB30 per kilogram to THB59 per kilogram, an increase of 96.6%.

At certain points, he said, the market had reached a stage where “even money could not buy supply”, after upstream producers declared force majeure to suspend delivery.

This caused shortages of some resin grades in Thailand, forcing factories to cut production to only 60-70% while assessing the situation day by day.

If the crisis lasts more than three months, it could spread to related industries.

Thailand’s total resin production capacity stood at 9 million tonnes in 2019 and has now risen to 11 million tonnes.

Around 50-55% of production is used domestically, while 45-50% is exported.

Thailand also still relies on imports, as imported resin is cheaper than the locally produced supply, particularly for SMEs.

Thai SME confidence has continued to decline, reflecting growing fragility in the grassroots economy amid external shocks, particularly geopolitical tensions that have pushed up energy and transport costs.

Dr Panita Shinawatra, deputy director-general and acting director-general of the Office of Small and Medium Enterprises Promotion (OSMEP), said Thai SMEs were now facing a severe “Double Squeeze” from rising costs and a significant decline in profitability.

A survey found that the cost index had plunged to 37.3, down 5.2 points, reflecting the burden from higher energy and transport prices.

The profit index also fell to 47.7 because businesses could not fully pass higher costs on to consumers.

In terms of economic activity, the production and order indices slowed by 1.8 and 6.4 points respectively, in line with weakening purchasing power.

The employment index remained steady at 49.2, reflecting efforts by business operators to keep their businesses afloat and preserve jobs as much as possible.

“SMEs are still fighting hard to preserve their existing business base, even as they face enormous pressure from costs and uncertainty in the global economy,” Panita said.

East and South are hit by energy and transport costs

By region, confidence declined in almost every part of the country, particularly in areas dependent on industry and tourism:

• The East recorded an index of 45.7, the sharpest fall at 5.3 points, due to the impact of energy costs on industry and agriculture.
• The South stood at 46.0, pressured by travel and tourism costs.
• Bangkok and its vicinity stood at 48.0, hit by the living costs and raw material costs.
• The North remained above the baseline at 51.9, although it also slowed.

“In-depth data reflect a worrying situation, with more than 96.7% of SMEs directly affected by the Middle East conflict in terms of energy, raw materials and purchasing power,” Panita said.

The most worrying issue is liquidity. Around 80% of business operators said they could keep their businesses running for no more than six months.

Among them, 20% had reserves lasting no more than three months, putting them at risk of closure.

The most urgent demands from the business sector were cost reduction, cited by 44%, and liquidity support, cited by 14%.

OSMEP readies 1% soft loans to support liquidity

To cushion the impact, OSMEP is preparing urgent assistance measures worth a combined THB1.2 billion in cooperation with state financial institutions.

The key measure is a low-interest loan at 1% for five years, with a one-year grace period on principal repayment.

The measure will focus on tourism and related businesses, such as small hotels and service shops.

Two other key funds are also planned: a THB400 million Enhancement Fund to upgrade machinery and reduce costs, and a THB400 million Transformation Fund to support business transformation through digital technology and AI.

Registration is expected to open in May, with demand likely to be strong enough for the funding to run out quickly.

In the longer term, OSMEP will move ahead with an integrated plan covering 39 projects with 17 state agencies and universities to strengthen SMEs in all dimensions.

Key measures include:

• The BDS “SME Pang Tang Dai Kuen” scheme, which helps cover 50-80% of expenses.
• The SME Access and SME Academy 365 platforms to expand business knowledge.
• Support for E-commerce and Live Commerce to reduce GP commission fees.
• Building influencer and student networks to help sell SME products.

“Amid the crisis, OSMEP still sees opportunities by pushing Thai SMEs to expand into new markets, such as Africa and niche markets in China, while highlighting Thailand’s strengths in food and consumer products to meet rising demand during the global crisis,” Panita said.

Do not compete on price, differentiate

On competition from Chinese products flooding in through e-commerce, Panita advised Thai SMEs to avoid competing on price and instead focus on quality and differentiation, while building brands and credibility.

She said Thai operators could not compete with the cost base of large-scale industrial producers.

Adaptation is now essential, especially the development of Green SMEs and the use of AI and digital technology to cut costs and improve efficiency.

OSMEP is preparing to submit all proposals to the SME Promotion Board for consideration, so that additional measures can be issued quickly.

“Our goal is to build a protective shield for Thai SMEs so they can survive and recover in the next quarter, even as they face global volatility,” Panita said.

Thai SMEs are now standing at a fragile point, squeezed by rising costs and weakening purchasing power.

Without timely support measures, the situation could lead to widespread business closures, making OSMEP a key force in keeping the country’s grassroots businesses alive during a turning point in the global economy.