Cost advantage keeps Gulf Petrochemicals competitive despite Hormuz turmoil
Source: الجزيرة نت - اقتصاد
Original summary written by Tharwa from the source above. How we source and correct stories
The story in brief
Analysts rule out buyers abandoning Gulf petrochemicals despite the Hormuz turmoil, thanks to lower production costs, while polyethylene prices jumped by more than 40% as global supplies were disrupted. Analysts ruled out that the disruption of petrochemical exports through the Strait of Hormuz would lead global buyers to permanently abandon Middle Eastern suppliers, in light of the continued superiority of Gulf producers in terms of production costs and industrial capabilities, despite companies’ tendency to diversify supply sources to reduce supply risks. According to Reuters, the Middle East accounted for more than 40% of global polyethylene exports last year, with Asian, European and Latin American markets relying on the region’s products used in packaging, consumer goods and various industries.
Detailed summary
Analysts rule out buyers abandoning Gulf petrochemicals despite the Hormuz turmoil, thanks to lower production costs, while polyethylene prices jumped by more than 40% as global supplies were disrupted. Analysts ruled out that the disruption of petrochemical exports through the Strait of Hormuz would lead global buyers to permanently abandon Middle Eastern suppliers, in light of the continued superiority of Gulf producers in terms of production costs and industrial capabilities, despite companies’ tendency to diversify supply sources to reduce supply risks. According to Reuters, the Middle East accounted for more than 40% of global polyethylene exports last year, with Asian, European and Latin American markets relying on the region’s products used in packaging, consumer goods and various industries.
list of 3 items list 1 of 3 Qatar and Saudi Arabia sign a memorandum of understanding to enhance cooperation in the field of energy list 2 of 3 Gulf oil flows regain 81% of pre-war levels list 3 of 3 Iran stops its petrochemical exports to secure the local market. Standard & Poor’s Global Market Intelligence data showed that the closure of the Strait of Hormuz, following the outbreak of the US-Israeli war on Iran late last February, led to the cessation of nearly 20% of global ethylene production capacity, and up to 40% of Asian naphtha supplies were disrupted, pushing prices higher. Saudi Arabia, the UAE and Qatar maintain a competitive position in the petrochemical industry, benefiting from the low cost of hydrocarbon feedstocks and huge industrial investments accumulated over decades. A spokesman for the German company BASF said that the recent unrest has reinforced the importance of diversifying supply chains, but he ruled out a decline in the importance of the Middle East in the long term, given its productive advantages and low costs.
Analysts pointed out that prices remain the decisive factor in decisions to purchase basic chemicals, making it difficult for alternative suppliers to compete with Gulf producers in a sustainable manner. Shipping disruptions accelerated companies' reliance on multiple suppliers, after the share of local and regional suppliers rose to about 20% of demand from some buyers, compared to levels that were almost non-existent before the war.
Background & context
This story sits within GCC's broader reform agenda and efforts to grow Oil & Gas as a pillar of non-oil GDP. The region benefits from supportive energy prices, expansionary government budgets, and rising interest from sovereign wealth funds and foreign investors.
Key numbers & facts
- Analysts rule out buyers abandoning Gulf petrochemicals despite the Hormuz turmoil, thanks to lower production costs, while polyethylene prices jumped by more than 40% as global supplies were disrupted.
- According to Reuters, the Middle East accounted for more than 40% of global polyethylene exports last year, with Asian, European and Latin American markets relying on the region’s products used in packaging, consumer goods and various industries.
- Analysts rule out buyers abandoning Gulf petrochemicals despite the Hormuz turmoil, thanks to lower production costs, while polyethylene prices jumped by more than 40% as global supplies were disrupted.
- According to Reuters, the Middle East accounted for more than 40% of global polyethylene exports last year, with Asian, European and Latin American markets relying on the region’s products used in packaging, consumer goods and various industries. list of 3 items list 1 of 3 Qatar and Saudi Arabia sign a memorandum of understanding to enhance cooperation in the field of energy list 2 of 3 Gulf oil flows regain 81% of pre-war levels list 3 of 3 Iran stops its petrochemical exports to secure the local market.
- Standard & Poor’s Global Market Intelligence data showed that the closure of the Strait of Hormuz, following the outbreak of the US-Israeli war on Iran late last February, led to the cessation of nearly 20% of global ethylene production capacity, and up to 40% of Asian naphtha supplies were disrupted, pushing prices higher.
Key points
- Analysts rule out buyers abandoning Gulf petrochemicals despite the Hormuz turmoil, thanks to lower production costs, while polyethylene prices jumped by more than 40% as global supplies were disrupted.
- Analysts ruled out that the disruption of petrochemical exports through the Strait of Hormuz would lead global buyers to permanently abandon Middle Eastern suppliers, in light of the continued superiority of Gulf producers in terms of production costs and industrial capabilities, despite companies’ tendency to diversify supply sources to reduce supply risks.
- According to Reuters, the Middle East accounted for more than 40% of global polyethylene exports last year, with Asian, European and Latin American markets relying on the region’s products used in packaging, consumer goods and various industries.
Why this matters
This matters because activity in Oil & Gas, Retail & E-commerce, Capital Markets shapes capital flows, hiring and investor sentiment across GCC.
Economic & market impact
Potential impact: - Oil & gas majors and oilfield services may react to volume, price or policy signals. - Retailers and e-commerce platforms may see consumer-spend impact. - Listed GCC equities and indices may see direct trading reaction. - Banks may see shifts in mortgage, project finance and corporate lending pipelines.
GCC angle
For the rest of the GCC, this is a signal on the pace of activity in Oil & Gas, Retail & E-commerce, Capital Markets. Capital flows and regulatory decisions in one Gulf state typically travel across borders given the similar economic structures and the coordination inside the GCC framework.
Risks & uncertainty
There is uncertainty around the read-through: projections can be moved by swings in oil prices, by US monetary policy tightening that most GCC central banks track via dollar pegs, and by regional geopolitical events. Headline numbers may also be revised when subsequent official data is published.
What happens next?
Watch for upcoming disclosures from listed names in Oil & Gas, Retail & E-commerce, official macro releases for GCC, and any commentary from regulators or sovereign wealth funds. Tharwa will refresh this briefing as new public information becomes available.
Sources used
This is an original Tharwa briefing based on the available source material. Read the full article from the publisher.
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