APIC Special Report 2026
S&P Global Energy
APIC 2026: Emerging stronger
Chemicals pivot from market shocks to strategic resilience
S&P Global Energy special report examines Japan’s shift to high-value chemicals, Middle East conflict's impact on Asian petrochemicals and strategies to build resilience and thrive amid disruption.
Asia adjusts petrochemical policies
Asia’s key petrochemical producing and consuming countries have implemented stabilizing measures to offset pressures from the Middle East conflict, US sanctions and tariffs, including redirecting upstream chemical and intermediate production toward essential commodities, relaxing import duties and extending financial support to the sector.
The Middle East conflict has disrupted supply chains, sharply reducing Asian imports of upstream commodities from the region, including in China, India, South Korea and Southeast Asia.
Due to maritime constraints in the Strait of Hormuz, global vessel and container availability declined as shipping traffic nearly halted, which also restricted exports of downstream value-added products from several Asian origins.
India prioritizes essential commodities
On March 9, the Indian government directed domestic oil refining companies to maximize propane and butane streams -- whether produced, recovered or fractionated -- for the production of LPG, resulting in the suspension of production for several downstream petrochemicals.
India also removed customs duties on certain petrochemical and chemical imports, effective from April 2 through June 30, reducing overall levies on 40 petrochemical imports to zero.
While the initiative provided some price relief for imports of methanol, acetic acid, purified terephthalic acid and monoethylene glycol, among others, it potentially benefited Chinese suppliers of solvents such as toluene and phenol, making China-origin material more competitive.
40
products
had import duties reduced to zero in India to ease supply constraints
Market participants reported varying impacts of the duty cut across several segments. In the polyurethane chain, Middle East supply disruptions possibly overshadow support from the duty exemption, according to an Indian polymer producer, who cited its short validity period.
The Indian methanol market also experienced negligible effects, as prices had already more than doubled due to the war, according to market sources.
Certain chemicals, such as normal butyl acrylate, have gained from the removal of Bureau of Indian Standards quality controls between April 10 and July 10 -- a move that diversified supply chains by opening the market to countries previously restricted by quality-control requirements.
China’s feedstock diversification
Market participants in China have reported increasing coal-to-olefins, or CTO, manufacturing to diversify their feedstock requirements.
While many countries have grappled with high polypropylene prices since the start of the Middle East war in late February, those in China remained comparatively lower.
Some Chinese CTO plants have been reported to be operating at 100% capacity, whereas propane dehydration plants and naphtha crackers were running at 60% to 70% capacity, depending on feedstock availability, according to market sources.
Market participants estimated that about 23% of current polypropylene capacity in China was being fulfilled by CTO production.
However, market sources in India said that although polypropylene produced at CTO plants in China was offered at more competitive levels than material from C3-based plants, its inland location primarily helped alleviate Chinese domestic supply concerns rather than bridging the export gap.
“Some CTO plants [in China] are running at full capacity, and there are challenges in shipping both granules and finished products out of China. So, more material could be staying within the domestic market,” an India‑based producer said.
South Korea's financial support
South Korea said in April it will provide up to Won 674.4 billion ($458 million) in funding to subsidize import costs for petrochemical feedstocks and olefins, as part of supply stabilization measures to counter the impact of the Middle East war on its domestic industry.
The support program will cover 50% of the price gap between prewar levels and actual import prices for naphtha, LPG, condensate, ethylene and propylene volumes contracted between April and June, according to an April 15 announcement by the Ministry of Trade, Industry and Energy.
Earlier in April, South Korea’s Financial Services Commission announced plans to increase financial support for private-sector oil refiners and petrochemical companies affected by supply chain disruptions linked to the Middle East conflict. The commission instructed state-run banks to provide additional liquidity to facilitate crude oil procurement.
While such measures offer immediate relief, market participants noted that long-term changes in trade flows resulting from the ongoing war and sanctions will be crucial for the petrochemical sector to monitor.
Global petrochemicals market coverage
Contributors: Charlene Goh, Fumiko Dobashi, Heng Hou Cheong, Mainak Moitra, Sophia Yao, Stuti Chawla, Su Yeen Cheong, Sunaina Kura, Thiam Hock Tan, Zachary Ooi, Zhi Yi Tan, Zi Nin Tan
Editors: Ankit Ajmera, Rizwan Choudhury, Ribhu Ranjan, Sivassanggari Tamil selvam
Design: Energy Content Design
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