Current Situation

The recent escalation of military conflict between the U.S. and Iran has severely disrupted the Strait of Hormuz, a critical global energy chokepoint. The strait handles approximately 20% of the world's seaborne oil trade and 25% of global LNG shipments, making it the central node through which the current situation impacts global supply chains.

Key Impacts on the Chemical Industry

▎ Increased Crude Oil Price Volatility

Brent crude futures briefly surged to $119 per barrel following the outbreak of the conflict, the highest level since 2022. As crude oil is the source of the petrochemical value chain, its price fluctuations will gradually pass through to all downstream chemical products.

▎ Supply Risks for Key Chemical Raw Materials

· Methanol: Iran is China's largest source of imported methanol. Approximately 70% of China's methanol imports come from Gulf countries, with 80% of that volume transported through the Strait of Hormuz.

· Sulfur: The Gulf region accounts for about 45% of global sulfur exports. Supply tightness has already pushed up costs for fertilizers and sulfuric acid.

· LPG/Naphtha: The Middle East is China's primary source of LPG and naphtha. Cracking facilities along the eastern coast that rely on these imports are facing direct pressure.

▎ Logistics Disruptions

Transit volume through the Strait of Hormuz has dropped by approximately 97%. Vessels are being forced to reroute via the Cape of Good Hope, resulting in longer voyage times and higher freight rates, which will ultimately increase the landed costs of imported goods.

Cost Pass-Through Timeline

The transmission of price increases from crude oil to end-consumer products involves time lags, with effects expected to unfold over the coming months:

· 2-4 weeks: Crude oil price increases pass through to chemical products

· 4-8 weeks: Chemical price increases pass through to downstream manufactured goods

· 8-12 weeks: Manufactured goods price increases reflect in end-user retail prices

Our Response and Recommendations

As a company deeply specialized in chemical foreign trade, we recommend the following to our clients:

Short-Term Actions

· Monitor inventory levels of high-risk products (methanol, MEG, LDPE) and consider increasing safety stocks where appropriate

· Confirm order delivery schedules in advance, allowing buffer time for transportation

· Maintain communication with us regarding alternative sourcing options

Long-Term Positioning

· Geopolitical conflicts highlight the vulnerability of energy supply chains; feedstock diversification will become an ongoing trend

· Alternative routes such as coal-to-chemicals may gain cost advantages and present new opportunities

We will continue to monitor developments closely and provide timely market updates and recommendations. For specific product inquiries or adjustments to your procurement plans, please feel free to contact us.

Sources: International Online, China Petroleum Daily, Yicai Global, Xinhua Finance, etc.