Unprecedented growth opportunities for the agile chemical company

In brief

• Approximately 13 million metric tons of chemicals per month are affected by the blockade of the Strait of Hormuz (Strait).
  
  
• Critically, even if the Strait reopens, supply disruptions are expected to persist across several quarters.
  
  
• Companies that move quickly will be able to capture outsized gains, as many customers will prioritize speed and reliability over price.

The impact of the Strait of Hormuz blockade on the chemical industry

The blockade of the Strait of Hormuz (Strait) is causing massive, unprecedented disruptions—affecting not just oil and gas, but also chemical raw materials and finished products. The Gulf Cooperation Council (GCC) region is a critical global chemical production hub, and its disruption is being felt across customer industries worldwide.

To illustrate the scale: 37% of global naphtha, 36% of global polyethylene, 35% of global polypropene and 44% of global ethylene glycol, are exported through the Strait.

Years of inventory optimization have left many customers with only a few weeks of inventory. Those customers are now drawing heavily on safety reserves and urgently seeking alternative supplies to keep their operations running.

Thousands of customers—particularly in China, India and Brazil—must now source approximately 76 million metric tons of chemicals from elsewhere.

Supply disruptions are expected to persist, impacting chemical distribution

Our research indicates that around 13 million metric tons of chemicals per month are affected by the blockade. Critically, even if the Strait reopens, supply disruptions are expected to persist across several quarters. Whiplash effects from constraints in maritime transport, port capacity, product availability, shipping times and other factors will continue to ripple through the industry.

Chemical value chains are inherently complex. Shortages of raw materials sourced from the GCC often don't become visible until second or third orders are placed—a lag that could shift cost positions in countries like China and Japan.

On the other hand, these disruptions are also recalibrating chemical value chains and creating significant new opportunities, particularly in segments where overcapacity and low utilization rates have suppressed value. Companies that move quickly will be able to capture outsized gains, as many customers will prioritize speed and reliability over price—and will pay a premium for it.

The path forward

Companies best positioned for resiliency will be able to:

• Anticipate demand before customers know they need it, using AI-enabled analysis of internal and external data.
• Forecast demand accurately and pre-position the right inventory in the right locations.
• Rapidly shift sales efforts into new and emerging markets.
• Commit to reliable delivery dates and pricing with confidence.
• Adapt supply networks and transportation routes quickly.

During COVID-19, most companies responded with task forces, spreadsheets and manual data integration to extract basic insights. Since then, AI and enterprise platforms have opened up a new performance frontier—enabling companies to identify actionable insights at granular levels (which customers, which products, which locations) and act on them at speed and scale, including reaching new customers and dynamically reshaping supply and transport networks.

But technology alone is not enough. Success also requires a versatile workforce—one that can adopt new tools, embrace new ways of working and unlock value in practice. Investing in training, upskilling and capability-building is essential to acting on these opportunities and building a lasting competitive advantage.

The most resilient won't just be those with cost-efficient assets and low-cost raw materials. They will be those who combine those strengths with a new operating fabric built on data, insight, speed and end-to-end agility. Legacy business systems—with siloed data and fragmented ways of working across functions—are increasingly becoming a liability, widening the performance gap between old and new business models.

The Strait of Hormuz blockade is only the latest in a continuous series of disruptions reshaping the chemical industry. Each disruption creates growth opportunities—but only for companies with the right insights, the speed to act and the swiftness to seize new opportunities before others do.