Impact of Changes in the Middle East on the Chemical Industry in the Short, Medium, and Long term

Orient's research report states that in the short term, TACO faces a difficult supply gap, and the main driver of the chemical industry market is the unexpected price increase caused by supply constraints. In the medium term, market trends will be driven by the increasing competitive advantage and industry trends, resulting in further differentiation of chemical competitiveness both domestically and internationally, as well as the growth of the new energy industry trend. In the long term, the Middle East is expected to become a new blue ocean for Chinese chemical companies, potentially offering significant development opportunities for Chinese companies in the region. Orient's main points are as follows: Short term, TACO faces a difficult supply gap The most direct impact of the conflict in the Middle East is the interruption of passage through the Hormuz Strait, leading to a supply shortage of petrochemical raw materials. Despite Trump's repeated efforts to influence oil prices with the so-called "TACO," the supply gap has not changed. Due to security concerns, countries are forced to distort economics, leading to greater impact on the chemical industry and higher prices when refineries reduce their loads. The report believes that the real shortage of petrochemical raw materials will have an increasingly significant impact on chemical prices as long as the conflict situation remains unclear. Medium term, increased competitive advantage and industry trends opening up The report suggests that the industrial outcomes of the Middle East conflict may be similar to the Russia-Ukraine conflict in 2022, and will result from two main factors: 1) the rise in natural gas prices in traditional energy sources will further widen the global competitiveness gap in the chemical industry; 2) green energy will be redefined, with a significant increase in safety value, accelerating industry development. The impact of natural gas prices on carbon-chemical and energy costs in countries like Europe, Japan, and South Korea is significant. In contrast, these costs in China mainly rely on coal, resulting in relatively minor changes. The impact of this conflict on natural gas supply is comparable to the Russia-Ukraine conflict and will further weaken the competitiveness of overseas chemical companies. Additionally, this conflict has shown other countries a model for significantly avoiding disruptions in fossil energy sources. The report predicts that the global development of green energy and green fuels will accelerate significantly in the future. Long term, the Middle East is expected to become a new blue ocean for Chinese chemical companies The report believes that the changes in the industry following the withdrawal of US troops from Iraq will provide certain guidance for the outcome of the Middle East conflict. With the weakening of US influence in Iraq, Chinese companies have flourished in resource development and petrochemical projects in the region. This not only reflects the progress of China's manufacturing and technological capabilities but also demonstrates the development achieved by Chinese enterprises through leveraging national influence under geopolitical changes. If the collaboration between Gulf countries and China shifts from economic cooperation to political and even security cooperation in the future, the process of Chinese companies expanding into the Middle East through capital outflow is expected to accelerate significantly. Furthermore, the Middle Eastern countries possess strong resources and financial capabilities, which could bring about significant development opportunities. Risk warning: Changes in the Middle East conflict situation; demand lower than expected; changes in assumed conditions affecting the calculation results.