Plastics Supply Chain Collateral Damage in Iran War

As refineries are idled across the Middle East as the Iran war escalates, and the Strait of Hormuz remains paralyzed, global plastics supply chains may be among the collateral damage of this conflict.

Massive export volumes of chemicals and plastics go through the Strait of Hormuz from Saudi Arabia, Qatar, the United Arab Emirates (UAE), and Kuwait, with key destinations being China, the rest of Asia, and the European Union, writes Joe Chang, Global Editor, Chemical Business, at business intelligence firm ICIS.

84% of Middle East polyethylene (PE) capacity depends on the Strait of Hormuz for export access, along with 14 million tonnes of methanol, and 6.5 million tonnes of ethylene glycol, a precursor chemical for PET and other resins, he writes in his analysis published on the ICIS website.

US companies sheltered from economic impact:

While this will put upward pressure on prices globally, US companies could end up being net beneficiaries, according to analysis from Goldman Sachs.

Lead analyst Duffy Fischer points out that as oil prices rise, naphtha-based competitors in Europe and Asia are squeezed, while US chemical makers that rely more on natural gas are relatively insulated due to domestic production. That, in turn, widens the US margin advantage in the production of plastics and resins, fertilizer, and industrial and specialty chemicals.

The US is a major exporter of PE, to the tune of around half of total production, and, thus, can play a key role in plugging the gap with increased exports to Europe and Asia, acknowledges PE watcher Harrison Jacoby, a colleague of Chang’s at ICIS.

"The US can certainly help fill gaps from potential Middle East supply disruptions and would welcome the opportunity, as the potential of a highly restrictive antidumping duty of $734.32/tonne on US PE by Brazil has significantly reduced recent shipments to the country, which was the third largest importer of US PE in 2025.

"The US is seeing production costs move lower this month, supporting strong production rates. However, the US would fall short of completely backfilling 100% of Middle Eastern exports if such an extreme outcome were to become reality.

Europe and Asia pay hefty price:

Europe and the Asia Pacific region will feel the greatest economic impact from the conflict, writes Chang, as they are major importers of crude oil and liquid natural gas from the Middle East. European PE and polypropylene producers have gone from separately looking for a €30 to €50/tonne increase for March contracts to separately offering triple-digit increases.

Meanwhile, US producers of olefins and polyolefins using shale gas feedstock will become even more cost-advantaged on a relative basis as crude oil prices rise, Chang adds. The US exports roughly half of its PE output, and it could increase shipments of PE and ethylene glycol to Europe and Asia to help offset shortages.

source : Plastics Today