On April 14, South Korea officially issued emergency control measures, clarifying that during the period from April 15 to June 30, it will start anti-hoarding for seven core petrochemical raw materials including ethylene, propylene, butadiene, benzene, toluene, and xylene. Special supervision. The policy requires that the total inventory of relevant enterprises should not exceed 180 of the corresponding level in the same period last year, which also means that the impact of geopolitical conflicts in the Middle East on the global chemical industry has spread from simple price fluctuations to the overall stability of the industrial chain.
Affected by the continued tension in the Red Sea region, the cost of global maritime insurance has risen sharply, by a range of 35% to 40%, and the cost of insurance on some high-risk routes has directly doubled. In the case of the Dubai-Rotterdam chemical route, the cost of insurance per tonne of cargo has climbed from $200 in 2023 to $330 today. Shipping companies had to bypass the Cape of Good Hope, with an average increase in transport cycles of 12 to 15 days and overall logistics costs rising by 15 to 20 per cent in tandem.
The shipping environment in the Gulf region continues to deteriorate. According to Lloyd's of London, more than 15% of the Gulf routes have been rejected by insurance companies. Chemical companies can only choose alternative routes with higher costs or bear all kinds of risks in transportation.
As a large manufacturing country with a high degree of dependence on foreign raw materials, the supply of petrochemical raw materials in South Korea is stable, which is directly related to many downstream industries such as plastics, fibers, rubber, electronic materials, auto parts and so on. it will even affect the export of the national manufacturing industry and the overall economic operation. The introduction of the control policy clearly delineates the implementation cycle, coverage category and inventory ceiling, is not a formal measure, the core is to stabilize the second quarter of this key cycle. Mid-April to the end of June is the key stage for the global market to digest the impact of the Middle East situation, Asian buyers to adjust procurement plans, and chemical companies to adjust product pricing.
Industry analysts said that South Korea's move is intended to break the vicious circle of "enterprises hoarding and hedging & rarr; market supply tightening & rarr; prices continue to rise. Enterprises out of concern about rising prices, supply disruption of a large number of stocking, this collective behavior will further exacerbate the market supply and demand imbalance, magnify industry tensions.
For China's chemical industry, the Strait of Hormuz is a veritable industrial lifeline. Data show that 55% of domestic imported chemical raw materials come from the Middle East, 92% of which need to be transported through the Strait of Hormuz. The dependence on methanol imports is about 40%, and 85% of the imported goods are transported through this channel. The dependence on ethylene and propylene imports is 35%, and 78% of the imports depend on this route.
Once the supply of goods on this route is blocked, domestic chemical companies will not only have to bear higher cost pressures, but may also face a crisis of raw material supply interruption. In February this year, a polyethylene production enterprise in Zhejiang was forced to stop production for three weeks due to the interruption of methanol supply, resulting in a direct economic loss of more than 20 million yuan.
In response to such risks, domestic chemical companies are accelerating the optimization of supply chain layout. Sinopec's million-ton methanol storage base in Abu Dhabi has been officially put into operation. Wanhua Chemical lowered the proportion of methanol purchases in the Middle East from 40% to 25%, while increasing the proportion of sources in Southeast Asia such as Malaysia and Indonesia to 35%. COSCO Shipping has newly opened a Middle East-Southeast Asia-China route, which can bypass the Strait of Hormuz, and the transportation cost is only 12% higher than that of bypassing the Cape of Good Hope.
The conflict in the Middle East is driving the structural transformation of the global chemical supply chain. Over the past two decades, the industry has always built a global supply chain with the best cost as the core, and now resilience and safety have become the primary consideration. Europe is accelerating the construction of regional chemical industry closed loop, Asia is also strengthening the regional chemical industry chain coordination, the core goal is to reduce dependence on the Middle East shipping lines. China is also accelerating the construction of raw material storage hubs in Southeast Asia, and at the same time promoting coal-to-methanol projects in Inner Mongolia, Xinjiang and other places. It is expected that after the relevant projects are put into operation in 2027, the domestic dependence on methanol in the Middle East will drop by 15%.
In the short term, South Korea's anti-hoarding policy can play two roles: one is to cool the spot market and prevent raw material prices from deviating from market fundamentals due to hoarding behavior; the other is to provide stable expectations for downstream manufacturing companies to ensure that the next two months Core raw materials will not be hoarded at will.
However, this policy cannot solve the problem from the root cause. The long-term risks brought by the geopolitical conflict in the Middle East and the structural problems such as high import costs still exist, which can only alleviate the supply tension aggravated by panic in the domestic market.
South Korea's emergency measures have sounded the alarm for the entire Asian chemical industry: the current industry is not only facing the problem of rising prices, but also to be wary of panic hoarding leading to chaos in the industrial chain.
When supply chain risk rises to the level of national economic security, market operation will be separated from conventional business logic and more affected by policy regulation. This also puts forward new requirements for global chemical companies to build a more risk-resistant supply chain system in a complex and changeable international environment.
Industry experts believe that the Strait of Hormuz shipping fluctuations superimposed on South Korea's emergency control, is driving the chemical industry to usher in a deep change. In the future, industry competition will no longer simply compete with costs, and the safety and resilience of the supply chain will become the core competitiveness.
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