The conflict involving Iran has significantly altered China’s petrochemicals trade, enabling Chinese producers to reduce domestic oversupply by increasing exports as buyers across Asia seek alternatives to supplies disrupted by the loss of feedstock from the Persian Gulf. The shift has redirected trade flows and expanded China’s role as a regional supplier of key petrochemical products used in plastics, rubber and textiles.
According to the reported developments, reduced availability of feedstock from oil and gas fields in the Persian Gulf has prompted importers in countries including Vietnam and Indonesia to source petrochemical products from China. The country has been able to meet the increased demand because of its substantial stockpiles and its comparatively lower dependence on Middle Eastern supplies.
Industry analysts said the changes could have longer-term implications if the new supply relationships continue after the conflict ends. Chinese petrochemical producers have been facing persistent overcapacity, and the expansion of export markets could provide an outlet for excess production.
“The war has pushed many importers of petchem products, such as polyolefins, to turn towards Chinese suppliers out of desperation,” Darryl Xu, principal analyst for base chemicals and feedstocks at ICIS, said. Xu added that the situation has allowed Chinese petrochemical producers to establish supply chains across the rest of Asia.
Polyolefins, including polyethylene, are widely used in the production of everyday plastic goods. They are manufactured through a process in which crude oil and natural gas are cracked into olefins before being converted into more complex chemical compounds that are ultimately used to produce items such as food packaging, bin liners and toys.
Although disruptions to shipping through the Strait of Hormuz have also affected China, ICIS said the country has relied on alternative sources to offset the impact. These include existing inventories, a renewed coal-to-chemicals industry that does not depend on imported oil or gas, and sharply higher imports of ethane from the United States, which is produced from natural gas.
The shift in trade has been reflected in export and import data. According to ICIS, China became a net exporter of olefins for the first time in April and May, representing a change equivalent to about 10 per cent of global demand. Similar movements have also been recorded in downstream chemical products.
Philip Geurts, an analyst at BloombergNEF, said polyethylene recorded the most significant change. According to Geurts, China’s net imports of polyethylene declined to 35,000 tonnes in May from 988,000 tonnes in February, the month the conflict began. “I don’t think we’ve ever seen such a trade swing,” Geurts said, referring to polyethylene, the world’s most widely used plastic.
Analysts said a future easing of tensions between the United States and Iran may not fully restore previous trade flows. The conflict has highlighted the Strait of Hormuz as a vulnerable shipping route, a factor that traders may continue to consider when planning supply chains even after hostilities end.
At the same time, China continues to expand production capacity despite slower domestic economic growth. According to ICIS, the country’s annual ethylene capacity, the most important olefin, is forecast to increase from about 60 million tonnes in 2025 to around 80 million tonnes by the end of the decade. That expansion would give China as much as one-third of global ethylene capacity, increasing the importance of securing export markets to absorb additional production.
