Recent military action between Iran and the US in the Middle East, could lead to the closure of the Strait of Hormuz, and could seriously disrupt the global trade in chemical and oil products, which threatens the already fragile chemical manufacturing industry.
The US assassination of General Qasem Soleimani, head of the Iranian Revolutionary Guards’ overseas forces, on 3 January 2020, has stoked tensions between the Middle East and the West. Iran has retaliated on 8 January with missile strikes.
More than 20% of the world’s petroleum liquids, and a significant quantity of chemicals are transported through the Strait of Hormuz, one of the most vital trade routes, linking the Middle East with the rest of the world.
According to Hydrocarbon Engineering, the Independent Chemical Information Service (ICIS), quoting ICIS Supply & Demand forecasts for polyolefins exports in 2020, say there are 4.1m tonnes of Middle East high-density polyethylene (HDPE) production due to be exported via the Strait. For regions with net export positions, i.e. exports higher than imports, this accounts for 38 per cent of total net global exports.
There is greater supply risk for linear low-density polyethylene (LLDPE), which accounts for 51 per cent of total net global exports, with 3.1m tonnes out of the global 4.7m tonnes, 68 per cent, produced in the Middle East. Other important chemicals at risk include monoethylene glycol (MEG), ethylene and methanol.
As conflict is currently unlikely to be resolved quickly, it is urged that contingency plans are put in to place, as further escalation could create a global recession.
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