Gulf cost edge keeps chemical buyers hooked despite Hormuz risks
XLB•Chemical buyers are unlikely to permanently shift away from Middle Eastern suppliers despite Strait of Hormuz disruptions, as regional pricing and production scale remain hard to match. Middle Eastern producers supplied more than 40% of global polyethylene exports last year, while Dow said polyethylene prices had risen more than 40% since late February.
1. Cost advantages sustain demand
Chemical buyers are unlikely to permanently shift away from Middle Eastern suppliers despite disruptions to shipments through the Strait of Hormuz. The Middle East accounted for more than 40% of global polyethylene exports last year, supplying Asia, Europe and Latin America. Analysts said the region’s competitive pricing, production scale and proximity to markets continue to support demand.
2. Buyers diversify supply
The disruptions have accelerated dual sourcing, with domestic and regional suppliers capturing roughly 20% of demand, up from almost negligible levels before the war. BASF said the disruptions reinforced the importance of diversifying supply chains but were unlikely to diminish the Middle East’s long-term significance. Analysts said concerns about reliable supply could boost near-term demand for North American petrochemicals, but shifts are typically temporary.
3. Tighter markets lift prices
The supply disruptions have tightened global chemical markets, giving producers greater pricing power and allowing them to pass higher costs on to customers. Dow CFO Jeff Tate said in July that polyethylene prices had risen more than 40% since late February. Eastman Chemical reported nearly 10% higher second-quarter revenue, supported by higher volumes and a 4% rise in selling prices.
