Asian rice exporters grapple with packaging material shortage, rising costs

A shortage of polypropylene raffia packaging material stemming from the Middle East war has disrupted Asia's rice supply chain and increased bag costs, sources said March 18.

Market participants in the upstream PP segment said the disruption in the Strait of Hormuz has halted cargoes to India, which sources over 50% of its PP imports from the Middle East.

"Deals booked in February are also stuck, and so far no new vessel has been able to transit," a PP buyer in India said.

The short supply comes near the end of the fiscal year, when most raffia converters tend to buy on a needs-only basis to avoid carrying over a large inventory of raffia pellets into the fresh financial year starting April.

"The sudden supply shock was not anticipated, and the demand was already quite strong," said another India-based buyer of raffia.

Prices of raffia pellets in the domestic market have increased by more than Rupees 50,000/kg ($540/mt) since the war started Feb. 28, multiple market participants said. And prices were already in an uptrend beforehand, according to Platts data.

Platts assessed PP raffia/injection grade at $1,380/mt CFR South Asia on March 18, up $70/mt week over week. The price has climbed from $915/mt on Feb. 25 and $810/mt on Jan. 7.

Indian exporters said the cost of 50 kg PP bags has increased as much as $3/mt since the war to $6.50-$7/mt from $4-$4.50/mt in February, a Gujarat-based exporter said.

While the increase in bag costs will be factored into the FOB cost, the main impact will be a delay in supplies, leading to slower shipments, said a Delhi-based trader from a multinational company.

However, muted white rice demand is tempering the rise in FOB prices, a Nagpur-based exporter said, adding that Parboiled 5% rice demand remains strong.

Rising bag costs have made Indian WR less competitive, as buyers prefer higher-quality Thai WR, and the Thai price premium has narrowed to about $20/mt, the same exporter said.

Platts assessed India 5% WR sortex at $333/mt FOB on March 18, down $13/mt month over month, while Thailand was assessed at $360/mt FOB, down $14/mt month over month.

Pricing uncertainty in Thailand

Thai rice exporters said trade flows remain steady, although rising cost volatility across the supply chain is creating uncertainty in pricing.

"Trade is still moving; it hasn't slowed down, but the market is quite 'dusty' right now, with a lot of confusion around actual cost levels. It's not just about packaging. Costs across the board are becoming unstable — including bags, freight rates, container costs, and frequent increases from shipping lines, sometimes weekly. This makes it very difficult to determine a reliable cost base," said Wanniwat Kitireanglarp, deputy secretary general of the Thai Rice Exporters Association.

Bangkok-based sellers reported a tightening supply of packaging materials, particularly jumbo bags, leading to a rise in raw material costs.

One exporter said that the premium for jumbo bags over standard PP bags has increased to $5/mt from $4/mt previously, reflecting higher raw material prices despite continued sourcing from smaller suppliers.

Another Bangkok seller highlighted shortages across packaging materials, including LLDPE, BOPP, and jumbo bags, attributing the constraints to elevated crude oil-linked input costs. However, the seller added that procurement remains possible, albeit at higher prices.

Market participants said that FOB rice offers from Bangkok are currently being quoted subject to bag availability, indicating ongoing supply-side uncertainties in packaging.

Vietnam's reliance on China for packaging

In Vietnam, exporters also reported some tightness in packaging material supply, although the impact remains manageable. However, rising input costs are also being felt in Vietnam.

A Ho Chi Minh City-based exporter said materials can still be sourced from China, helping ease supply constraints.

Another Ho Chi Minh City-based seller said, "Higher plastic prices have pushed up the cost of empty bags by approximately 25%-30%."