Middle East Chemicals Keep Their Cost Edge Despite Hormuz Crisis

Despite the Iran war and the Hormuz crisis, Middle Eastern chemicals maintain their low-cost advantage over other regions, according to industry experts. The current constraints in the Persian Gulf's industrial base have prompted short-term shifts in polymer sourcing, benefiting U.S. chemicals companies. However, in the long run, the Middle East is expected to retain its competitive edge due to its extensive production base and abundant naphtha supply, making it attractive for global buyers.

While many customers have diversified their polymer supply due to the crisis, most see this as a temporary measure to protect against current disruptions rather than a permanent replacement for Middle Eastern polymers. The Middle East remains the world's largest exporter of polyethylene, accounting for 43% of global exports last year.

Despite some bottlenecks, the region's polyethylene exports (18.7 million tons) still account for a significant portion of global output (43.8 million tons). North America is projected to fill some of the supply gap caused by the Hormuz crisis, with exports of polypropylene from the Middle East showing the least impact among 12 key commodities.

However, the prices of polyethylene and polypropylene have surged by over 50% since March due to soaring plastics prices. U.S. chemicals producers, benefiting from cheap and abundant feedstock, are currently leading the global competition as Middle Eastern supply constraints intensify.