Goldman Sachs Perspective: Global Chemical Industry Crisis Looming

The obstruction of the Strait of Hormuz is triggering an unprecedented global chemical supply shock.

Goldman Sachs' latest report indicates that basic chemical product prices have soared by over 60% in recent weeks, setting the fastest record ever, with the rate and magnitude of price increases double that of the 2022 European energy crisis, and approximately 20% of the global chemical supply has been disrupted. The supply is unlikely to be restored in the short term, and the alleviation of physical supply of chemicals in Europe and Asia is not expected until the third quarter of 2026 at the earliest, with the risk of further price increases.

From a cost perspective, the price increase of petrochemical derivatives has an average impact of about 11% on the cost of goods sold for European and American companies, with the furniture, medical aesthetics, and apparel industries being the most affected. There is a lag of 6 to 12 months before this reaches the end consumer, and the peak of price pressure is expected to occur in the third or fourth quarter of 2026. The market is currently seriously underestimating the depth and breadth of this shock, and investors need to stay alert.

The Intensity of the Impact: Faster, Stronger, and Broader than the 2022 Energy Crisis

Compared to the 2022 European energy crisis, this crisis fundamentally differs in terms of the speed, magnitude, and geographical scope of impact.

The 2022 crisis was a gradual impact, mainly affecting natural gas in Europe, which accounts for about 10% to 15% of the cost of producing chemicals. This crisis, however, is a step change, directly hitting oil and naphtha—two core raw materials for the global petrochemical industry, jointly accounting for about 70% of production costs.

Looking at price trends, with the 15th week after the conflict as a benchmark, the increase in this year's chemical contract price index is double that of the same period in 2022, significantly exceeding European market performance at the time.

The impact is especially severe for the Asia-Pacific region. This region's chemical production relies on Middle Eastern imports for about 70% of its raw materials, much higher than Europe's 20%. And the Asia-Pacific region is precisely the core production area for global chemicals —it accounts for about 65% of global output and 51% of manufacturing value added, which means that a disruption in Middle Eastern raw materials will directly impact the hub of the global supply chain.

Chemical Shock Waves: Spreading from Low-Value Industries to Semiconductors

About 20% of the global supply of chemicals has been interrupted, with signs of profit compression, production cuts and halts, and demand contraction becoming increasingly evident in Asia and Europe.

As the global manufacturing pivot, Asia is facing the most severe supply shock in recent years. Several petrochemical plants have reduced their operating load to a minimum of 50% to 60%, and some factories are at risk of shutdown as inventories continue to be depleted.

The shock has spread from low-value industries such as textiles, packaging, and automotive parts to high-value sectors such as construction and semiconductor and memory chip production in South Korea. The latter face a risk of a shortage of critical chemical solvents, which are usually by-products of basic chemical production and not independent production processes.

Supply Recovery Timeline: Even if the Conflict Ends Immediately, Normalization is Not Expected Until 2027

Supply recovery faces a long cycle. Even if the Strait of Hormuz reopens immediately, the delivery of raw materials to Asia or Europe's petrochemical crackers will still experience multiple delays: approximately 30 days for safe passage permits, 30 days to clear shipping backlogs, 25 days for transport to Asia or Europe, 10 days for port congestion, and 45 days to restart the cracking unit, totaling about 140 days. This means that, in the most optimistic scenario, the alleviation of physical raw material supply will not occur until mid-to-late May 2026; if all frictional factors are considered, it may be postponed until mid-