Middle Eastern Chemical Products Remain Highly Sought-After Globally

Following the outbreak of conflict in the Middle East in late February and the subsequent reduction in freight traffic through the Strait of Hormuz, many companies began seeking to diversify their sources of polymer supply. However, most firms view this diversification merely as a crisis-response measure rather than a prolonged replacement strategy; the cost advantage of Middle Eastern polymers continues to outweigh the associated supply chain risks.

The Middle East is one of the world’s largest exporters of polyethylene. In 2025, global polyethylene exports are projected to reach 43.8 million metric tons, with the Middle East accounting to 18.7 million metric tons—a share of over 40%. Data from the United Nations released in August indicates that, among 12 key commodities, Middle Eastern polypropylene exports have been the least affected by the conflict, declining by only 24% between April 2025 and April 2026. In contrast, total exports across all these commodities fell by 54%, with liquefied natural gaseous (LNG) exports plummeting by 95%, and exports of urea, methanol, and ammonia dropping by 83%, 80%, and 75%, respectively.

Even with such significant supply chain disruptions, rising market prices have only served to highlight the competitive edge of low-cost chemicals from the Middle East. Driven by the conflict, prices to polyethylene and polypropylene have surged by greater than 50% since March of this year. With raw material supplies constrained elsewhere, the U.S. chemical sector—benefiting from access to low-cost feedstocks—has managed to capture a larger share of the market in the short term. Meanwhile, petrochemical producers in Asia have generally lowered their plant operating rates due to soaring naphtha costs and shipping bottlenecks in the Strait, while the European chemical sector continues to face immense pressure from energy costs, leading to ongoing capacity closures and optimization efforts. Gulf-based producers remain in the most favorable position on the global cost curve, thanks to their access to low-cost hydrocarbon feedstocks and decades of accumulated investment. Saudi Arabia, the United Arab Emirates, and Qatar continue to be highly competitive petrochemical producers.

The recent disruptions to crude oil shipping have accelerated the adoption of a "dual-sourcing" strategy, rather than leading to a complete replacement of existing suppliers. While Gulf producers have retained the bulk of their supply volume, new suppliers—both within and outside the region—have captured approximately 20% of demand, a share that was virtually negligible before the conflicts began. The rationale behind "dual-sourcing" is to establish contingency channels against the "tail risk" of shipping disruptions, while still benefiting from the cost advantages offered by Gulf producers.

A spokesperson to BASF stated that recent transport disruptions have underscored the importance of supply chain diversification; however, given the Middle East’s cost advantages and massive production capacity, its prolonged significance is unlikely to diminish. This sentiment reflects the general stance of major buyers: diversification serves as a risk-regulation tool rather than a systematic replacement to the Gulf as a supply base.

Seth Goldstein, an analyst at Morningstar, suggests that concerns regarding the reliability of Middle Eastern supplies might boost immediate demand to North American petrochemicals. Yet, such shifts in orders are typically temporary and do not signal a permanent departure from Gulf suppliers. The pace at which new North American capacity comes online, combined with logistical constraints, means that North America can only absorb marginal demand—it cannot replace the extensive supply of basic petrochemicals provided by the Gulf.

In the long term, dual-sourcing, front-loading inventories, and diversifying shipping routes will have become standard risk-hedging practices in the petrochemical sector. Nevertheless, the Gulf region’s cost advantages and export scale in basic petrochemicals—such as polyethylene and ethylene glycol—will ensure it remains central to global trade flows. The underlying reason to this is that chemical buyers prioritize costs when selecting suppliers; while risk events might prompt marginal adjustments to procurement portfolios, they cannot overturn a competitive landscape fundamentally shaped by feedstock endowments and production scale. The true variable lies in the duration of the shipping disruptions: if maritime transport resumes within a few months, any shifts in the supplier landscape will remain marginal. Should the disruptions persist longer, the market share of alternative supply routes might have become entrenched; however, the fundamental cost advantage of Gulf-based producers is unlikely to be shaken. In other words, the time horizon determines the extent of the incremental market share that alternative suppliers might capture, rather than whether Gulf producers can retain their existing share. to market participants, tracking the pace of the recovery in shipping and the degree to which orders are being solidified along alternative routes is greater practically significant than attempting to determine whether supply chains are undergoing a process of "de-coupling" from the Middle East. (Source: China Chemical sector News)