Tight Supply in Asian Petrochemical Market Worsens
2026-3-27
Recently, the negative impact of severely disrupted traffic through the Strait of Hormuz amid the conflict in the Middle East on the Asian petrochemical market has intensified further. Sustained tightness in the supply of feedstocks including naphtha and liquefied petroleum gas (LPG) has prompted more companies to declare force majeure and forced the market to seek alternative supply sources.
Disruptions to shipping lanes in the Strait of Hormuz have simultaneously hit the cost and supply of crude oil, naphtha, propane and other petrochemical feedstocks in Asia, directly dragging down operating rates at Asian crackers and downstream facilities. Compared with other regions worldwide, Asia relies heavily on feedstock imports via the Strait of Hormuz. In 2025, more than 54% of global naphtha shipments destined for Asia passed through the strait, as did 45% of LPG volumes. South Korea has been hit particularly hard, depending on the Middle East for 60% of its naphtha and 77.5% of its crude oil. Japan also faces elevated risks to its petrochemical feedstock supply, with its naphtha inventories sufficient for only about one month of operations. John Richardson, Director of ICIS Market Insight and Executive Partnerships, noted that Russia, Asia¡¯s second-largest source of naphtha imports, accounts for only 12% of the market, far below the Middle East. To what extent Russia can compensate for the massive supply gap caused by disruptions from the Middle East under multiple sanctions remains to be seen.
Downstream, plants across Asia are beginning to feel the pinch of supply tightness. As of press time, more than 10 cracker and downstream units in Asia dependent on Middle Eastern naphtha have been forced to reduce operating rates or declare force majeure. Multiple companies including South Korea¡¯s YNCC and Indonesia¡¯s Chandra Asri have already declared force majeure. LG Chem, Lotte Chemical and others have successively cut unit run rates; while facilities operated by India¡¯s GAIL, Thailand¡¯s ROC and others have even been forced to shut down. Idemitsu Kosan of Japan declared force majeure on March 16 at one of its paraxylene units fed by naphtha. A large number of polypropylene, polyethylene and polyethylene terephthalate (PET) units in the region have also successively declared force majeure and lowered operating rates.
ICIS analysts project that the average operating rate of South Korea¡¯s ethylene plants will drop to 67% in March from 80% in February. If naphtha supplies from the Middle East are fully cut off, Asian ethylene production losses could reach approximately 1 million tonnes in April. Affected by the strait closure, Asian propane dehydrogenation (PDH) units are also facing feedstock shortages. Industry sources expect PDH units may delay restart after maintenance or further reduce run rates, constraining propylene supply. In turn, oxo-alcohol units using propylene as feedstock are likewise facing shortages. For example, feedstock supplies at Petro-Oxo Nusantara¡¯s plant in Gresik, Indonesia, are expected to be exhausted by the end of March.
In India, natural gas is being prioritized for critical livelihood sectors, including residential piped natural gas, automotive compressed natural gas and LPG production. Core pipeline gas supply will be secured at 100% of the average consumption over the past six months where supply permits, resulting in cuts to natural gas allocated for chemical use. Multiple plants across India have been forced to lower operating rates.
However, producers using alternative feedstocks such as calcium carbide and coal are expected to gain growth opportunities in this crisis. Operating rates at regional carbide-based vinyl acetate monomer (VAM) units have risen to 74%, with relevant companies stepping in to fill the supply gap left by ethylene-based VAM.
Amid sharp volatility in feedstock prices recently, the Asian styrene monomer market has remained relatively resilient. Market participants attribute this mainly to three factors: solid profit margins, low dependence on ethylene, and short-term feedstock inventories acting as a buffer. Nevertheless, as crackers and refineries scale back operations, risks of tightening supply of benzene feedstock are rising steadily.
According to market participants, the ongoing blockade of the Strait of Hormuz shows that available alternative supplies can only partially offset the supply gap. Even though some processes are seeing opportunities, risks facing the industry as a whole will only intensify so long as the conflict drags on.
Disruptions to shipping lanes in the Strait of Hormuz have simultaneously hit the cost and supply of crude oil, naphtha, propane and other petrochemical feedstocks in Asia, directly dragging down operating rates at Asian crackers and downstream facilities. Compared with other regions worldwide, Asia relies heavily on feedstock imports via the Strait of Hormuz. In 2025, more than 54% of global naphtha shipments destined for Asia passed through the strait, as did 45% of LPG volumes. South Korea has been hit particularly hard, depending on the Middle East for 60% of its naphtha and 77.5% of its crude oil. Japan also faces elevated risks to its petrochemical feedstock supply, with its naphtha inventories sufficient for only about one month of operations. John Richardson, Director of ICIS Market Insight and Executive Partnerships, noted that Russia, Asia¡¯s second-largest source of naphtha imports, accounts for only 12% of the market, far below the Middle East. To what extent Russia can compensate for the massive supply gap caused by disruptions from the Middle East under multiple sanctions remains to be seen.
Downstream, plants across Asia are beginning to feel the pinch of supply tightness. As of press time, more than 10 cracker and downstream units in Asia dependent on Middle Eastern naphtha have been forced to reduce operating rates or declare force majeure. Multiple companies including South Korea¡¯s YNCC and Indonesia¡¯s Chandra Asri have already declared force majeure. LG Chem, Lotte Chemical and others have successively cut unit run rates; while facilities operated by India¡¯s GAIL, Thailand¡¯s ROC and others have even been forced to shut down. Idemitsu Kosan of Japan declared force majeure on March 16 at one of its paraxylene units fed by naphtha. A large number of polypropylene, polyethylene and polyethylene terephthalate (PET) units in the region have also successively declared force majeure and lowered operating rates.
ICIS analysts project that the average operating rate of South Korea¡¯s ethylene plants will drop to 67% in March from 80% in February. If naphtha supplies from the Middle East are fully cut off, Asian ethylene production losses could reach approximately 1 million tonnes in April. Affected by the strait closure, Asian propane dehydrogenation (PDH) units are also facing feedstock shortages. Industry sources expect PDH units may delay restart after maintenance or further reduce run rates, constraining propylene supply. In turn, oxo-alcohol units using propylene as feedstock are likewise facing shortages. For example, feedstock supplies at Petro-Oxo Nusantara¡¯s plant in Gresik, Indonesia, are expected to be exhausted by the end of March.
In India, natural gas is being prioritized for critical livelihood sectors, including residential piped natural gas, automotive compressed natural gas and LPG production. Core pipeline gas supply will be secured at 100% of the average consumption over the past six months where supply permits, resulting in cuts to natural gas allocated for chemical use. Multiple plants across India have been forced to lower operating rates.
However, producers using alternative feedstocks such as calcium carbide and coal are expected to gain growth opportunities in this crisis. Operating rates at regional carbide-based vinyl acetate monomer (VAM) units have risen to 74%, with relevant companies stepping in to fill the supply gap left by ethylene-based VAM.
Amid sharp volatility in feedstock prices recently, the Asian styrene monomer market has remained relatively resilient. Market participants attribute this mainly to three factors: solid profit margins, low dependence on ethylene, and short-term feedstock inventories acting as a buffer. Nevertheless, as crackers and refineries scale back operations, risks of tightening supply of benzene feedstock are rising steadily.
According to market participants, the ongoing blockade of the Strait of Hormuz shows that available alternative supplies can only partially offset the supply gap. Even though some processes are seeing opportunities, risks facing the industry as a whole will only intensify so long as the conflict drags on.