(Yicai) April 14 -- The impact on the global petrochemical industry of the war in the Middle East may be greater than similar crises in the past and is only just starting to show, energy analysts at Independent Commodity Intelligence Services have warned. Even a permanent ceasefire would not bring energy prices back down to pre-conflict levels in the near term, they said.

The ongoing conflict in in the Middle East and the closure of the Strait of Hormuz may have a bigger affect on the world’s petrochemicals supply than similar historical events in terms of scope, scale, and the breadth of products impacted, Zhou Ying, a senior analyst at data provider ICIS, said in a recent interview with Yicai.

“Compared with the two oil crises in the 1970s,” she said, “today’s global petrochemical capacity is far larger, supply chains are more integrated, and regional interdependence is tighter, so the supply gap and the range of affected products triggered by the disruption far exceed historical levels.

“Asia is being hit especially hard,” Zhou pointed out.

Iran effectively shut the Strait of Hormuz -- through which about 20 percent of the world’s crude oil and liquefied natural gas trade flows -- in late February after the United States and Israel began airstrikes on the country, including on its energy infrastructure. With ceasefire talks having failed, President Donald Trump said the US would impose a blockade on Iran starting yesterday, sending West Texas Intermediate oil prices 8 percent higher at the market open.

Daily vessel traffic through the 33-kilometer wide strait plunged by about 95 percent to just six ships last month from around 130 in February, data from the United Nations Conference on Trade and Development showed.

Methanol prices across Asia soared between 68 percent and 141 percent in the first week of April from late February, with prices in some markets hitting new record highs, according to ICIS figures.

In addition to oil, polyethylene prices should also be closely monitored, Yu Ting, another analyst at ICIS, told Yicai.

“The Middle East is one of the world's two largest polyethylene exporting regions, and the Strait of Hormuz is the primary shipping route for producers from Saudi Arabia, Qatar, Kuwait, and other regions," she said. “Alternative routes via Oman and other ports have emerged, but shipping costs are much higher.”

Far-Reaching Shakeup

The conflict will accelerate a reshaping of global chemicals capacity and trade flows, and stimulate the rapid development of new energy-related industries, Yu predicted.

QatarEnergy's liquefied natural gas trains RasGas 2 Train 4 and RasGas 3 Train 6 have been damaged in the conflict, with official repair timelines estimated at three to five years, leaving the global market facing a sustained supply shortage of 12.8 million tons of LNG per year, said Xu Fei.

"Global natural gas fundamentals have shifted from an expected supply surplus to a state of tight balance, with prices more likely to gradually decline rather than snap back quickly to pre-conflict levels," Xu noted.

Even if the Middle East crisis eases in the second quarter, and shipping gradually resumes through the Strait of Hormuz, average prices for crude oil and naphtha this year will remain much higher than last year as supply-side facilities and production will take time to recover, Wang Yan told Yicai.

More than 60 percent of Asia's naphtha imports, around 45 percent of its liquefied petroleum gas imports, and about 60 percent of its methanol imports pass through the Strait of Hormuz, said Zhou Xiaoyang.

Many Asian countries, including South Korea, Japan, Malaysia, and Vietnam, are facing direct energy supply shocks, Zhou noted, adding that many have revised their petrochemical feedstock import plans, rushing to lock in long-term supply agreements outside the Middle East.

Asia's petrochem producers have long relied heavily on single-source imports from the Middle East, a model that they may not continue, said Sun Lijia. The importance of alternative petrochemical feedstock sources, including the US, Russia, and Africa, will rise markedly.

"Even if costs are somewhat higher, their 'security premium' will be repriced," Sun noted, warning that the geopolitical risks go beyond the supply side.

"Sustained uncertainty will suppress downstream companies' willingness to restock and slow their investment pace, altering the timing of demand release," he pointed out. “This effect typically does not disappear when a conflict ends but shapes the operating logic of the global petrochemical industry for much longer.”

Editor: Futura Costaglione