The supply shortage in the Asian petrochemical market has intensified.

Obstruction of raw material transportation directly drags down the operation of cracking units and downstream operations.

　　Recently, the severe obstruction of the Strait of Hormuz due to the Middle East conflict has further exacerbated the negative impact on the Asian petrochemical market. The supply of naphtha and liquefied petroleum gas (LPG) feedstocks continues to tighten, leading more companies to declare force majeure and forcing the market to turn to alternative sources.

　　The disruption of shipping through the Strait of Hormuz has impacted the cost and supply of petrochemical feedstocks such as crude oil, naphtha, and propane in Asia, directly dragging down the operating rates of Asian cracking units and downstream industries. Compared to other regions globally, Asia is extremely reliant on feedstocks imported via the Strait of Hormuz. In 2025, over 54% of global naphtha shipments to Asia passed through this strait, and 45% of liquefied petroleum gas (LPG). South Korea is particularly hard hit, relying on the Middle East for 60% of its naphtha and 77.5% of its crude oil. Japan also faces significant risks in its petrochemical feedstock supply, with its naphtha inventory only sufficient for about a month. John Richardson, Director of Market Insights and Executive Partnerships at ICIS, stated that Russia, the second-largest source of naphtha imports to Asia, accounts for only 12% of the market, far lower than the Middle East. Under multiple sanctions, the extent to which Russia can compensate for the huge gap caused by the Middle East supply disruption remains to be seen.

　　Downstream, factories across Asia are beginning to feel the strain on supply. As of press time, more than 10 cracking units and downstream plants in Asia that rely on Middle Eastern naphtha have been forced to reduce operating rates and declare force majeure. Several companies, including YNCC in South Korea and Chandra Asri in Indonesia, had already declared force majeure, while LG Chem and Lotte Chemicals have reduced their unit loads. Companies like GAIL in India and ROC in Thailand have even been forced to shut down. Idemitsu Kosan in Japan declared force majeure on March 16th for a naphtha-based paraxylene unit. Numerous polypropylene, polyethylene, and polyethylene terephthalate (PET) plants in the region have also subsequently declared force majeure and reduced their operating rates.

　　ICIS analysts predict that the average operating rate of South Korean ethylene plants will drop to 67% in March from 80% in February. If the supply of naphtha from the Middle East is completely cut off, Asian ethylene production could lose approximately 1 million tons in April. Affected by the strait closure, Asian propane dehydrogenation (PDH) plants are also facing a feedstock shortage. Industry insiders expect that PDH plants may postpone their restart after maintenance or further reduce operating rates, leading to limited propylene supply. Consequently, carbonyl alcohol synthesis plants using propylene as feedstock are also facing feedstock shortages. For example, Petro-Oxo Nusantara’s plant in Geumseok, Indonesia, is expected to run out of feedstock by the end of March.

　　In India, natural gas is being prioritized for critical sectors of daily life, including residential piped gas, compressed natural gas for vehicles, and liquefied petroleum gas (LPG) production. With core pipeline gas supplies guaranteed at 100% of the average consumption over the past six months, chemical gas consumption has been reduced, forcing many factories in India to lower their operating rates.

　　However, companies using alternative raw materials such as calcium carbide and coal are expected to gain development opportunities in this crisis. The operating rate of calcium carbide-based vinyl acetate monomer (VAM) plants in the region has risen to 74%, and related companies are working to fill the supply gap in ethylene-based VAM.

　　Despite recent sharp fluctuations in raw material prices, the Asian styrene monomer market has remained resilient. Market participants cite three main factors as contributing to this: stable profit margins, low dependence on ethylene, and a buffer provided by short-term raw material inventories. However, with cracking units and refineries reducing their operating rates, the risk of a tightening supply of raw material benzene is steadily increasing.

　　Market analysts say the current blockade of the Strait of Hormuz indicates that existing alternative sources can only partially fill the supply gap. Even if some processes see opportunities, the risks to the entire industry will only intensify as the conflict continues to drag on.