According to Sina Finance, Covestro—a global leader in the chemical industry—recently announced that its MDI products across all end markets in North America are subject to force majeure. Simultaneously, Dow Chemical’s MDI plant in North America is experiencing supply disruptions; the root cause for both lies in interruptions to the carbon monoxide and chlorine supply chains. The North American MDI market is dominated by Covestro, Dow, Huntsman, BASF, and Wanhua Chemical, which collectively control 95% of the region's production capacity. With two of these giants halting production simultaneously, the resulting short-term supply gap will be extremely difficult to bridge.

Since late February 2026, global supply chains for energy and chemical products have experienced widespread fractures. Sulfur inventories have fallen below the critical three-week threshold; lithium hexafluorophosphate stocks are down to just a one-week supply; and the two leading MDI producers in North America declared force majeure on the very same day. The global chemical market is rapidly shifting from a phase of "price negotiation" to a crisis of acute scarcity, where securing any supply at all has become a formidable challenge.

Oil: Epic Supply Shortfall; Inventories Depleting Rapidly

According to data from the IEA, global oil supply fell to 95.1 million barrels per day in April—a staggering reduction of 12.8 million barrels per day compared to pre-conflict levels. Of this decline, over 14 million barrels per day of production capacity in the Gulf oil-producing nations has been taken offline. The IEA has subsequently downgraded its forecast for global crude oil supply in 2026 by 3.9 million barrels per day, leaving the global market facing a supply deficit of 1.78 million barrels per day. Global commercial crude oil inventories collectively shrank by 246 million barrels between March and April—a new historical record. Currently, at least eight major refineries in the Gulf region have either partially or completely halted operations; additionally, the Ras Laffan LNG plant in Qatar has ceased production, with repairs expected to take several years to complete.

Sulfur: Less Than Three Weeks of Supply Remaining; Entire Supply Chain Under Pressure

Total sulfur inventories at domestic ports currently stand at a mere 1.08 million tons—a year-on-year decline of 50%. Based on an average monthly consumption rate of 1.5 million tons, current stocks represent less than three weeks' worth of supply. In recent days, at least seven enterprises—including Shandong Huifeng Petrochemical, Changyi Petrochemical, Hongrun Chemical, Xintai Petrochemical, and Hebei Xinhai Chemical—have continuously suspended price quotations; notably, the production facilities at Huifeng Petrochemical have already been shut down. Quotes for granular sulfur at Zhenjiang Port have reached 7,460 RMB/ton—a year-on-year surge of 195% and a cumulative increase of over 600% since the second half of 2024. Given an import dependency exceeding 65% (with half of imports originating from the Middle East), import volumes in the first quarter fell by 37% year-on-year. Major Middle Eastern producers have collectively raised their price quotes: Kuwait's KPC increased its May FOB price by $195 month-on-month to $765 per ton, while QatarEnergy raised its price to $740 per ton—marking a new high since 2013. As a byproduct of oil refining and natural gas desulfurization, sulfur supply elasticity is virtually zero. According to estimates by SDIC Securities, the global sulfur supply-demand deficit is projected to reach 300,000 tons, 5.13 million tons, and 4.05 million tons in 2025, 2026, and 2027, respectively. Downstream enterprises have already been hit hard: Xingfa Group reported a 17.37% year-on-year decline in first-quarter net profit, while Liuguo Chemical posted a net loss of 90.38 million yuan, and Chitianhua recorded a net loss of RMB28.47 million.

Lithium Hexafluorophosphate: Only One Week of Inventory Remaining; The "Heart" of Lithium Batteries Comes to a Sudden Halt

Industry-wide inventory stands at approximately 6,000 tons—sufficient to meet downstream demand for only one week—marking an absolute historical low. By mid-May, the average spot price had reached 176,500 RMB/ton, an increase of nearly 80% from the 98,000 RMB/ton recorded at the beginning of May. Leading industry player Duofuo Duo confirmed that industry inventory levels are critically tight, while Tianji Shares emphasized the robust demand from downstream electrolyte manufacturers. Driving this price surge is a structural reversal in supply and demand: continuous inventory destocking during the first quarter forced small-to-medium-sized production facilities to shut down en masse due to financial losses, while leading enterprises prioritized fulfilling long-term contracts, resulting in a complete depletion of spot market liquidity. The supply-demand deficit is projected to reach 7,000 tons in the fourth quarter.

MDI: 20% of Global Capacity Idled; North American Giants Trigger Supply Shortage

Approximately 1.94 million tons of global MDI production capacity are currently operating at reduced loads or have been completely idled, accounting for 20% of total global capacity. On May 19, Covestro announced a *force majeure* event affecting its MDI products across all end markets in North America. Concurrently, Dow Chemical’s MDI facility in North America experienced supply disruptions; the root cause for both issues lies in a disruption to the carbon monoxide and chlorine supply chains. The North American MDI market is dominated by five major players—Covestro, Dow, Huntsman, BASF, and Wanhua Chemical—which collectively control 95% of the region's production capacity. The simultaneous shutdown of facilities by two of these giants implies that the resulting short-term supply deficit will be extremely difficult to bridge. Compounding this situation is Tosoh’s earlier announcement—effective May 1—of an MDI price hike of approximately $500 per ton; consequently, global MDI prices have accelerated their upward trajectory, with current market rates hovering around 18,000 RMB per ton.

The Olefins Value Chain: A Domino-Effect Collapse from Naphtha to Ethylene

Tanker traffic through the Strait of Hormuz has plummeted by over 98% compared to normal levels, resulting in the indefinite postponement of shipping routes for more than 60% of Asia's naphtha imports. The naphtha cracking spread in Asia has skyrocketed from $108 per ton prior to the conflict to an all-time high of $466.85 per ton. The South Korean government has officially designated ethylene and propylene as "critical crisis commodities"; in response, Yeochun NCC has decided to permanently shut down two of its naphtha cracking units, while Lotte Chemical has likewise idled a cracking unit with an annual capacity of 1.1 million tons. Should the disruption in the Strait persist over the long term, approximately 35 million tons per year of ethylene production capacity in Asia will face the critical risk of raw material supply cutoffs.

On the domestic front, four major suppliers—Luxi Chemical, Shenghong Petrochemical, Huatai Shengfu, and Xinpu Chemical—have continued to suspend sales quotations. Specifically, Xinpu Chemical has ceased offering quotes for its 780,000-ton/year facility due to critically low inventory levels. Regarding pure benzene, inventory levels at ports in East China have dropped from 318,000 tons at the beginning of the year to 148,000 tons as of May 18; meanwhile, Jingbo Petrochemical has suspended its price quotations for 11 consecutive days, effective since May 11. In the styrene market, production capacity affected by scheduled maintenance in May exceeds 2 million tons per year, driving the industry's operating rate down to a mere 68%. Shandong Yuhuang’s facilities—totaling 450,000 tons/year in capacity—remain offline, with a restart date yet to be determined; additionally, Shengyuan Petrochemical’s 80,000-ton/year facility has been idled since August 2023, with no immediate plans for a restart. Methanol and Hydrofluoric Acid: A Cliff-like Drop in Imports and the Chip Supply Chain Crisis

The monthly supply-demand deficit for methanol has reached 500,000 tons, while social inventories have declined by 20% year-on-year. With an import dependency rate of 20%—over 70% of which is sourced from the Middle East—import volumes have plummeted precipitously. Recently, more than a dozen enterprises—including Jinniu Xuyang, Dingzhou Tianlu, Qitaihe Longpeng, Qitaihe Jiwei, Shanxi Yangmei Fengxi, Anhui Quansheng, Tianjin Bohua, Zhongyuan Dahua, Ningxia Baofeng, Ningxia Dadi, Shaanxi Xinghua, and Xinjiang Xinlianxin—collectively suspended their price quotations. This suspension covers a combined production capacity exceeding 3 million tons per year; notably, Qitaihe Jiwei’s 80,000-ton/year facility is currently undergoing maintenance, with no scheduled date for resumption.

Regarding hydrofluoric acid, South Korea's semiconductor industry has plunged into a raw material crisis: a shortage of sulfur has caused sulfuric acid prices to skyrocket, thereby driving up production costs for hydrofluoric acid. South Korea relies on imports from China for 90% of its anhydrous hydrogen fluoride; procurement prices have surged by approximately 40% since the beginning of the year, and Samsung Electronics and SK Hynix have been notified that prices for electronic-grade hydrofluoric acid are set to undergo further substantial increases in June and July.

Meanwhile, a wave of price quotation suspensions is sweeping across the entire industry, intensifying by the day. As of 12:00 PM on May 21, the domestic chemical and energy sectors had collectively issued over 250 "no quotation at this time" notices, involving approximately 200 enterprises and 62 distinct product categories. In terms of product distribution, the highest concentrations of suspensions were observed for monoammonium phosphate (10 companies), MTBE (9 companies), elemental bromine (9 companies), and marine fuel (9 companies). Regarding the reasons cited for the suspensions, facility maintenance or shutdowns accounted for 33.9%; reserving output for internal use (with no external sales) accounted for 20.2%; and prioritizing the fulfillment of previously placed orders accounted for 12.1%. Additionally, 24.5% of the enterprises simply noted "no quotation at this time" without specifying a reason.

The Disappearance of the Buffer Layer: "Shortages" Are More Alarming Than "Prices"

The true nature of the current crisis transcends mere price inflation; rather, it signifies a systemic erosion of the global supply chain's capacity to absorb and withstand risk. As inventory levels across major core product categories successively breach critical thresholds, the market's "safety cushion"—originally intended to buffer against unforeseen contingencies—has been stretched to its absolute limit. This implies that even the slightest fluctuation in supply could directly trigger a chain reaction leading to supply disruptions.

Moving forward, the ability to re-establish a secure inventory defense line will depend not only on whether geopolitical tensions and maritime shipping channels improve, but—more crucially—on whether domestic enterprises can accelerate the restoration of production capacity and implement alternative solutions amidst the pressure of high operating costs. In the short term, the supply-demand imbalance spanning from upstream raw materials to downstream end-markets is expected to persist; consequently, phenomena such as stockouts, suspended quotations, and lengthy queues for deliveries will become the market norm until inventory levels are fully replenished across the entire supply chain.

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