The battered European chemicals industry has simply closed a weak but nevertheless better-than-anticipated first quarter because the supply shock from the Middle East hit Asian petrochemical makers amid dried-up naphtha and other feedstock supplies from the Persian Gulf.
Asia’s petrochemicals sector is exceptionally dependent on naphtha, liquefied petroleum gasoline (LPG), and methanol from the Persian Gulf.
Across Asia, shortages of naphtha and other main petrochemicals feedstocks because to the Iran war have already forced petrochemicals firms to reduce output.
While Asian chemicals and petrochemicals manufacturers are struggling from the Middle East supply stock, Europe’s chemical industry– in a crisis mode since the 2022 energy crisis – is feeling relieved.
The relief is likely to be temporary, executives and analysts warn, and don’t anticipate a sustained recovery beyond the disruption that’s hitting Asian rivals. Once Strait of Hormuz supply returns, Asia will nonetheless be a cheaper chemicals manufacturers with cheaper energy costs.
“The begin of the year was weak, but since March, we’ve seen a mild positive momentum. Due to the battle in the Middle East, the supply chains of many Asian competitors have been delayed, causing customers to turn back to European providers including LANXESS,” Matthias Zachert, CEO of the Germany-based chemicals giant, stated in remarks on the Q1 results.
“Supply capability is presently a large aggressive benefit,” Zachert added, but referred to that the company has increased prices for a lot of its products to pass at the raised costs of raw materials, energy, and logistics.
Another European chemicals manufacturers, Evonik, also mentioned raised sales volumes in certain businesses since March, due to the war, “likely because of customers involving in pre-buying.”
Yet some other European corporation, Solvay, reported solid first-zone performance, but added “we do not anticipate the operating environment to improve within the short term.”
All the supply capability benefit will go away once flows to Asia normalize, analysts and executives say.
“There is no reason to be swept up by euphoria,” Lanxess’ CEO Zachert informed Reuters.
