SunSirs: Geopolitical Conflict Tears a Rift in Europe’s Chemical Supply Chain

This month, global chemical giant BASF issued a major announcement: it is raising prices for its home care, industrial cleaning, and industrial formulation product portfolios in Europe by up to 30%, with some products seeing even higher increases. The new prices take effect immediately or will be applied in accordance with existing contracts.

The direct cause of this significant price hike is the escalation of geopolitical conflict in the Middle East. Tensions in Iran continue to escalate, and the Strait of Hormuz—a critical global oil transport route—has effectively been blocked. As one of the world’s most vital energy transport chokepoints, the Strait of Hormuz handles approximately one-fifth of global oil shipments. Since the outbreak of the conflict, the international crude oil market has experienced severe volatility, with Brent crude prices surging from around $70 per barrel to over $100, a rise of more than 40%. At the same time, natural gas prices in Western Europe have doubled in a short period, and the sharp rise in energy costs has placed enormous pressure on European chemical companies.

The chemical industry is rightly known as an energy-intensive sector. From basic chemicals to fine chemical products, virtually every stage of production relies on energy sources such as oil and natural gas. Crude oil is not only a vital energy source but also the direct source of basic chemical feedstocks such as ethylene, propylene, and benzene; Natural gas serves both as a fuel and as a feedstock for products such as synthetic ammonia and methanol. When the prices of these basic energy sources rise sharply, cost pressures are transmitted throughout the entire chemical industry chain, ultimately reflecting in product prices.

In its announcement, BASF explicitly stated that this price adjustment is primarily in response to severe fluctuations in the prices and supply of key raw materials, the continued rise in domestic and international logistics costs, as well as significant increases in packaging and energy costs. It is worth noting that the affected products are primarily concentrated in the home care and industrial cleaning sectors, including key formulation ingredients such as surfactants, emulsifiers, polymers, and chelating agents. These products are widely used in household chemicals such as detergents and cleaning agents, and are closely tied to the daily lives of end consumers.

In fact, BASF is not the only European chemical company taking action. Another German chemical giant, Wacker Chemie, has also announced price increases for its polymer products effective April 1, citing the same reasons: severe distortions in the commodities market caused by the military conflict in the Middle East, and sharp rises in the prices of oil, natural gas, raw materials, and logistics. Although companies such as Covestro and Evonik have not yet implemented large-scale price adjustments, they have all indicated that they are closely monitoring cost changes and will adjust their pricing strategies accordingly.

From a broader perspective, this crisis has further exacerbated the challenges facing the European chemical industry. Since the Russia-Ukraine conflict in 2022 disrupted Russian natural gas supplies, the European chemical sector has been undergoing a difficult adjustment period. Soaring energy costs have already forced many companies to cut production capacity or even shut down plants, resulting in a significant decline in the industry’s overall profitability. Now, the blockade of the Strait of Hormuz has once again exposed the European chemical industry’s heavy reliance on external energy supplies, making the issue of energy security even more urgent.

On the one hand, the severe volatility in global energy markets will inevitably be transmitted to domestic markets through international trade, necessitating close monitoring of raw material price trends; on the other hand, China’s chemical industry is relatively more resilient in terms of energy structure and supply chain layout, and some companies may gain a comparative advantage in international market competition. This incident once again highlights the importance of energy transition and supply chain diversification.

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