August 2026 | Market Update
What Matters in August Markets
From Chuck Hoop, Business Director, Star Plastics
See what’s inside:
- Check out what’s happening inside:
- Red Sea Shipping Disruptions Return
- Chip Industry Faces Talent Shortage
- Housing Market Stays Under Pressure
- Economy Proves Surprisingly Resilient
- USMCA Renegotiation Creates Uncertainty
- Turbine Parts Supply Crunch Grows
- New York Pauses Data Center Growth
- PFAS Compliance Deadline Isn’t The Story
- Strategic Oil Reserve Under Pressure
- China’s Oil Demand Could Shift Markets
- Materials & Market Pricing Update
A new shipping snarl in the Middle East
Oil prices are moving higher again as the conflict involving Iran, the United States and Israel spread into the Red Sea. There have been issues with the Red Sea in the past and they have been overshadowed by the Iran war and the Strait of Hormuz crisis in the last several months. Houthi rebels attacked ships near the Bab el-Mendeb Strait, a key shipping route that handles about 7% of the world’s oil shipments and has become an important backup since traffic through the Strait of Hormuz was disrupted.
If the Red Sea route remains closed, ships could be forced to take much longer routes around Africa, adding as much as 30 days to some deliveries. That would mean higher freight costs, longer lead times and more pressure on petrochemical and plastics supply chains.
It is still too early to know how much this will affect resin pricing, but the earlier Hormuz disruption helped drive polyethylene prices up by 30 cents per pound. Dow is already planning another PE price increase in August, and continued shipping problems could give suppliers more support for additional increases. Oil also climbed above $100 per barrel after the July 22 attacks, showing that the market is becoming more concerned about another major supply disruption. See the full outlook.
The U.S. chip boom has a 157,000-worker problem
The LA Times says the U.S. semiconductor push has plenty of money and new factories, but it may not have enough skilled workers to run them. Chipmakers such as Taiwan Semiconductor Manufacturing Company, Intel, Micron and Samsung are investing heavily in new plants, yet the industry could be short as many as 157,000 workers by 2030. The gap is top to bottom in technical needs and includes engineers, technicians, equipment specialists, quality experts, and manufacturing operators. These are jobs that require years of specialized training and hands-on experience.
AI is making the problem worse. The same boom driving demand for more advanced chips is also pulling engineers and technical graduates toward higher-paying software, data science and machine-learning jobs. Only about 3% of U.S. engineering graduates reportedly enter the semiconductor industry, leaving chipmakers competing for a very small talent pool.
This is becoming more than just a hiring issue. A lack of workers could delay new factory openings, slow production increases and keep the U.S. dependent on overseas chip manufacturing. That could affect data centers, automakers, defense companies and other industries relying on AI and advanced electronics.
The main takeaway is that building factories is only half the job. The U.S. will also need stronger university and community-college programs, apprenticeships, employer training, recruitment from other manufacturing industries and potentially skilled immigration. Without enough qualified people, some of the country’s expensive new chip plants could struggle to reach their full potential. Explore the full story.
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NAHB/Wells Fargo Housing Market Index (HMI)
Builder confidence in the new single-family housing market softed in July, with the NAHB/Wells Fargo Housing Market Index falling two points to 34. Since any reading below 50 signals that more builders view conditions as poor than good, the latest number shows the market remains under pressure. All three components declined. Current sales conditions slipped to 37, expectations for the next six months fell to 43, and prospective buyer traffic dropped to a very weak 23. Builders are also working harder to close deals: 37% reduced prices in July, with an average cut of 6%, while 63% offered sales incentives. Incentive use has now remained at 60% or higher for 16 straight months. The main issue continues to be affordability. Elevated mortgage rates and high home prices are keeping many potential buyers on the sidelines, while builders are also dealing with expensive financing, labor and construction materials. Overall, the July report suggests the housing market is cooling rather than collapsing, but builders are unlikely to feel much better until borrowing costs ease and buyer affordability improves. Unpack the details.
Despite Headwinds, Economy Remains Resilient
The economy has faced a number of significant headwinds in 2026, most notably the Iran war, which has caused energy costs to spike and inflation to reaccelerate. Core personal consumption expenditures inflation, the Fed’s preferred inflation gauge, increased to 3.4%, the highest rate in three years and was not even close to the central bank’s 2% target. Despite these challenges, the economy continues to post solid data, suggesting that recession risk remains contained. Consumer confidence has improved, but sentiment itself is highly politicized, reducing its value as an economic forecast indicator. The labor market has lost momentum recently but continues to show employment gains and a low level of unemployment. In June, the economy added 57,000 jobs. While positive, this was the smallest gain since an outright loss was reported in February. The unemployment rate was a low 4.2% in June, but the labor force participation rate declined to 61.5%, its lowest level in more than five years. Residential construction employment lost 8,900 workers in June and has now declined in four of the last five months. Over the last year, the residential construction sector has lost nearly 49,000 jobs. Despite hiring weakness in the home building sector, job openings across the broader construction industry increased to 298,000 in May, up from 220,000 a year ago. Data center and tech-related construction has increased demand for construction workers. Amid ongoing housing affordability challenges, residential construction growth has been led by remodeling in recent quarters. For example, according to the Census Bureau’s construction spending report for May, improvement-related spending was up 8.1% over the last year. By contrast, during that same period, single-family construction spending was down 4% while multifamily construction spending was up 3.3%. These trends will continue for the remainder of 2026, with home equity and an aging housing stock powering the remodeling market. Understanding the impact.
Demand Surges for Turbine Parts
Are turbines the next microchip? Demand for turbines is getting tight from two directions at once: aircraft makers need them for jet engines, and hyperscalers need them to support the massive power demand coming from data centers. The real bottleneck is not just the turbines themselves, but the highly specialized parts inside them, especially turbine blades and vanes. Only a small group of companies dominate production of these critical parts, including Howmet Aerospace, Precision Castparts, Consolidated Precision Products, and Doncasters. These components are extremely difficult to make because aircraft turbine parts must handle very high heat, intense pressure, and rapid rotation states the article in the Wall Street Journal (WSJ). Power turbine parts are not quite as demanding, but they use similar manufacturing technology; so there is the bottleneck. The article continues saying the result is a major supply crunch. Aircraft wait times are now 10 years or longer, while heavy-duty power turbines can have backlogs of up to eight years. That is also increasing demand for spare parts because airlines are flying older aircraft longer, and power turbines are being pushed harder to support electricity demand. Discover what’s next.
New York Set to Ban Construction of Large New Data Centers
According to The Wall Street Journal, an anti-AI movement is starting to spread across the U.S. as communities push back against the construction of data centers. Residents are worried these facilities could strain local power grids, use up water and other resources, and ultimately drive up utility bills. We’ve been talking about the current state of the U.S. electrical grid for quite some time.
New York Gov. Kathy Hochul has temporarily halted construction of new, large-scale data centers for up to a year while the state develops new environmental and electric grid regulations. Farmers and ranchers are also raising concerns about how the data-center boom could affect rural communities, and some residents are even using AI tools to help organize opposition to local projects. Farmers will lose land and the water that they need for their cattle and crops.
AI is also creating controversy in the workplace. A group of former Meta employees is suing the company, claiming AI systems were used to help select workers for layoffs and may have unfairly targeted employees with disabilities or those on protected leave. And surprisingly, while much of the discussion around AI focuses on machines replacing workers, the bigger long-term economic challenge may be the opposite: fewer people entering the workforce, creating labor shortages even as AI adoption continues to grow. Read the full article.
The PFAS rule fight isn’t the story. What happens after it is.
Anoosheh Oskouian was featured in a mid-month Plastics News article discussing the recent PFAS debate. She noted that while much of the conversation has centered on whether the EPA is rolling back drinking water regulations or simply improving the regulatory process, the more important question is what utilities and manufacturers do next. PFAS does not disappear because a deadline changes, and the underlying health and cleanup risks remain in place. EPA may extend the PFOA and PFOS compliance deadline by two years and reconsider standards for four other PFAS compounds, but those chemicals could return under stricter rules later. PFOA and PFOS also remain hazardous substances under Superfund, so cleanup liability continues regardless of drinking water regulations. The practical takeaway is that companies and water systems should use any extra time to plan, budget and install treatment capacity. Waiting for the rules to settle could leave us facing tighter standards, higher costs and greater liability down the road. Continue reading.
Frequent Oil Draws From U.S. Strategic Reserve Push Old System to Breaking Point
In a mid-month WSJ article, we have found that we have leaned heavily on the Strategic Petroleum Reserve over the past four years, both Presidents Biden and Trump released about 352 million barrels to help control oil prices and offset supply disruptions. These withdrawals, combined with aging equipment and limited maintenance, are putting strain on the reserve’s underground salt caverns and pumping systems. The reserve can no longer move oil as quickly as it was designed to. Its estimated withdrawal capacity has fallen from 4.4 million barrels per day to about 2.7 million, while refill capacity has dropped from 785,000 barrels per day to roughly 440,000. Equipment failures, damaged wells, and aging pipelines have become more common, including a 2024 well rupture that reportedly lost as many as 400,000 barrels.
China Could Be About to Remove Oil’s Biggest Safety Net in Mid-July
Oilprice.com article by Tsvetana Paraskova, the oil market may be getting close to a breaking point. On a macro scale, prices have avoided record highs despite the massive disruption through the Strait of Hormuz because China sharply reduced its purchases, global inventories were drawn down, and governments released emergency oil supplies. Those cushions are now starting to disappear.
China could have the biggest impact on the oil market. They are the world’s largest crude importer, who cut June imports to about 7.1 million barrels per day, the lowest level in nearly a decade. It was able to do that because it had built up an estimated 1.2 to 1.3 billion barrels in reserves before the Iran war. However, China has reportedly started tapping those reserves and may return to the market for more oil in July and August. If Chinese buying picks up, it would add significant demand to an already tight market.
At the same time, global crude and fuel inventories are falling quickly. The world has used an estimated 600 million to 700 million barrels from storage since the crisis began, and much of the emergency government oil release has already reached refiners. Renewed fighting and another slowdown in tanker traffic through Hormuz are also delaying the expected recovery in Middle Eastern exports. The bottom line is that the supply, inventory and demand buffers that kept prices under control are nearly exhausted. Unless Hormuz traffic improves soon, analysts believe oil prices could rise sharply later in the third quarter or early in the fourth quarter. Review the findings.
Materials and Market Pricing
(Remember – the prices listed below are relative and not absolutes.) Polycarbonate market conditions are mixed by region. North American demand remains comparatively strong, with operating rates around the mid-60% range. Asian demand improved because of traders buying and essential restocking, although supply remains available and producer margins continue to be under pressure. European demand is stable, but consumer-market orders are declining as customers work through inventories accumulated during the second quarter. Pricing is expected to be volatile in the near term because higher feedstock, energy, and geopolitical costs could support August and September increases. After that, there is an expectation of easing with North American prices averaging about $1.70 per pound in Q3 and $1.65 per pound in Q4, European prices declined from about €3,060 per metric ton in Q3 to €2,860 in Q4, and northeast Asian prices rose briefly to about $1,762 per metric ton in Q3 before easing to $1,690 in Q4.
ABS is experiencing weak demand overall, with North American demand expected to remain flat for the rest of the year. Asian demand is weak, and European orders are starting to show signs of declining demand. Producers have experienced reduced operating rates, while the market still has excess availability. Higher acrylonitrile and other feedstock costs could provide temporary support, but underlying fundamentals remain ‘bearish’. North American ABS prices are forecast to average approximately $1.55 cents per pound in Q3 and $1.52 in Q4. European prices are expected to decline more substantially, from about €2,540 per metric ton in Q3 to €2,270 in Q4. Northeast Asian prices may recover modestly to around $1,550 per metric ton in Q3 before slipping to $1,520 in Q4.
Nylon 6 demand is stable to low in North America, while Asian activity has improved primarily because of opportunistic buying and inventory replenishment rather than sustained end-use growth. European demand weakened in July, and buyers remain cautious because they anticipate lower resin and caprolactam costs. Pricing may firm temporarily in Asia, but the longer-term trend is softer. North American Nylon 6 is forecast at about $1.60 per pound in Q3, falling to $1.52 in Q4 and $1.46 by Q2/27. European pricing is expected to remain relatively stable, at approximately €3,450 per metric ton in Q3 and €3,370 in Q4. Northeast Asian prices are forecast near $1,840 per metric ton in Q3 and $1,830 in Q4.
Nylon 66 conditions are somewhat more balanced than nylon 6, although demand is only stable to low in North America. Asian operating rates declined sharply month over month, and prices have fallen, indicating continued supply pressure. European demand was more satisfactory than for nylon 6 in July, but regional operating rates still weakened. Adipic acid and other feedstock costs offer some support, but the market does not appear ‘structurally tight’. North American prices are expected to decline gradually from about $1.78 per pound in Q3 to $1.66 in Q4 and $1.60 by Q2/27. European prices are forecast to remain close to current levels, at approximately €3,590 per metric ton in Q3 and €3,540 in Q4. Northeast Asian pricing is expected to remain near $2,480 per metric ton through Q4.
Polypropylene market conditions are generally weak, although North American buyers have started to restock after limiting purchases during the previous two months. Planned maintenance may reduce producer operating rates through the fall, but demand remains insufficient to support a major sustained increase. European demand is particularly weak, with imports competing aggressively against domestic material, while Asian buyers continue to push back on higher offers. For North American compounded polypropylene, talc-filled material is forecast at $0.80 per pound in Q3 and $0.79 in Q4. The glass-filled grades are forecasted at $1.02 per pound in Q3 and $1.00 in Q4. Higher oil, naphtha, and propylene costs could lead to price-increase attempts in August, though we still have weaker demand which will hamper the ability to get price increases through.
PBT demand is low in North America and weak across European end-use sectors. European operating rates remain depressed because of soft consumption and significant import competition coming from Asia. The Asian demand improved modestly through restocking, but operating rates continued to decline, showing that producers are managing persistent oversupply. Pricing is therefore expected to remain flat to lower, with only a possible short-term rebound in Asia. North American PBT is forecast at about $1.50 per pound in both Q3 and Q4, compared with a July price of $1.57. European prices are expected to decline from approximately €3,290 per metric ton in Q3 to €3,200 in Q4. Northeast Asian prices are forecast at about $1,350 per metric ton in Q3 and $1,290 in Q4 before recovering modestly in 2027.
The overall market theme during the conflict was concern over potential supply shortages and sharp price increases, which did lead to escalation in costs and therefore prices. However, weak underlying demand did not support a sustained “buy-ahead” strategy, as customers remained cautious about building inventory. North America has experienced a comparatively stable cost environment, but demand has been more sluggish. Renewed concerns about disruption or closure in the Red Sea introduce additional risk, as vessels may need to reroute around the Cape of Good Hope, South Africa, which increases transit and freight costs. This could create near-term cost pressure and greater price volatility.
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