Unbearable! Middle East crisis severs the 'lifeline' of the chemical industry—Wanhua, Formosa Plastics, Dow, and other giants issue force majeure declarations en masse.

With the disruption of shipping routes through the Strait of Hormuz persisting, global chemical enterprises reliant on Middle Eastern feedstocks have been forced into a 'supply cutoff' mode. From delivery failures on cargo orders to reduced operating loads across production facilities, a wave of force majeure declarations spanning multiple industries has taken shape. On March 7, Wanhua Chemical officially issued a force majeure notice covering all products destined for the Middle East. The notice explicitly cited severe disruptions to shipping routes through the Strait of Hormuz, resulting in unforeseeable, unavoidable, and insurmountable safety risks and performance obstacles. Notably, Wanhua Chemical clearly defined the scope of its force majeure declaration—applying exclusively to orders and delivery obligations related to the Middle East region. Its Yantai base—home to two ethylene cracker units—continues operating at high load and stable capacity; overall production and business operations remain unaffected. The company activated its emergency response mechanism immediately and is continuously monitoring the evolving geopolitical situation in the Middle East. The duration of the force majeure declaration will be dynamically adjusted based on developments. Shortly thereafter, Longhua New Materials issued a force majeure notice on March 10, declaring that all orders affected by the Middle East situation would fall under force majeure provisions effective immediately—making it yet another Chinese chemical enterprise impacted. Longhua New Materials specializes in polyether polyols (PPG), polymer polyols (POP), and nylon 66 production, with total polyether capacity exceeding one million tons annually. On the same day, Tianjin LG Bohai Chemical formally declared a force majeure event, stating that the blockade of the Strait of Hormuz had disrupted supply of key feedstocks—naphtha and ethylene—and that ethylene allocation had already become impossible, directly undermining production fulfillment. The company announced it would progressively reduce operating capacity across all production facilities. Additionally, on March 9, Formosa Plastics Corporation, Ltd. issued an official notice indicating severe delays in the arrival of crude oil and naphtha feedstocks procured from the Middle East due to the Strait of Hormuz shipping disruption. Consequently, the company declared force majeure on its two core petrochemical building blocks—ethylene and propylene. Affected by delayed feedstock arrivals, all production facilities under FPCC’s Olefins Business Unit will operate at minimum capacity starting March 9, 2026. Western chemical giants were similarly affected. On March 9, Dow Chemical notified customers that logistics operations in the Middle East were suffering major disruptions, and that the finished-product manufacturing capacity at its Jubail plant in Saudi Arabia was materially impaired. It explicitly placed Saudi-manufactured products—including butyl glycol ether, ethanolamine, and ethylenediamine—under force majeure. INEOS Group, the European chemical giant, announced that supply of certain PVC contracts was affected by force majeure, triggering sharp price surges for PVC across Europe and Turkey. Meanwhile, INEOS Oxide’s ETAC (ethyl acetate) supply from its Hull facility experienced a failure. Japanese and Korean petrochemical giants were compelled to reduce operating loads. On March 6, LG Chem announced 'severe interruption' of operations at its carbonyl alcohol plant. Effective immediately, it suspended fulfillment of certain DOTP (dioctyl terephthalate) export contracts scheduled for March–April due to force majeure. DOTP is a high-performance plasticizer, especially suited for PVC cable compounds requiring superior insulation properties, flexible PVC products, and artificial leather films. Moreover, LG Chem announced it would reduce cracker unit load to 60% and may shut down its No. 2 cracker unit at the Yeosu complex.

What happens after foreign trade orders disappear?

This transmission lag is approximately one to two quarters. The order declines observed today will translate into employment data in Q4 2026 through Q1 2027. That set of data, in turn, will further depress consumption expectations for 2027. When a 50-year-old factory shuts down and nearly ten thousand workers lose their jobs, surrounding service sectors—restaurants, rental housing, retail shops—will contract synchronously over the following months. For every one manufacturing job lost, approximately 0.5–0.8 service-sector jobs are also eliminated. This is not merely a decline in income for the same group of people—it represents a broader removal of purchasing power: wage earners in manufacturing stop consuming, and service-sector workers dependent on those expenditures likewise lose orders. IV. Where Is the Boundary of 'Smooth Transition'? Fiscal space remains available: the 2026 deficit ratio stands at 4%, and the broad deficit ratio at 8.1%. Yet this does not mean 'smooth transition' holds true at any scale. When foreign trade order losses shift from 'marginal reduction' to 'catastrophic collapse', fiscal smoothing faces three constraints: (1) the physical boundary of fiscal space—RMB 5.89 trillion in deficits cannot cover employment losses affecting tens of millions; (2) transmission lags—the cash-flow collapse at export-oriented factories occurs before fiscal policy can take effect; and (3) the direction of the multiplier effect—when export contraction becomes a sustained expectation, the government spending multiplier falls below normal levels, because corporate and household responses partially offset fiscal expansion: firms refrain from hiring amid expectations of continued order loss, and households hold back consumption amid expectations of falling income. Moreover, the accelerating pace of export contraction itself further compresses the effective space for the expenditure multiplier. At sufficiently large scales, governments face not the question of 'whether tools exist', but whether 'tools can keep pace with the speed of transmission'. V. Irreversible Losses The danger of disappearing orders lies not in 'temporarily earning less', but in the irreversibility of supply chain relocation. When persistently high freight costs erode the price competitiveness of Chinese exports to the Middle East, local buyers will not wait indefinitely. They will shift to alternative sources—such as Turkey, India, or Southeast Asia. Once alternative supply chains are established, orders may not return even if the Strait of Hormuz resumes full navigation. Once supply chains are rerouted, they do not automatically revert to prior configurations. This is precisely where the irreversibility of foreign trade order losses resides—not in automatic restoration upon 'channel recovery', but in the fact that 'channel disruption' itself has already completed supply chain reconfiguration. Channel recovery merely opens the door to renewed competition—not automatic order restoration. VI. Acceleration, Not Uniform Speed Deterioration is not linear—it accelerates. Each additional unit of pressure compresses available space at an ever-increasing rate. Four positive feedback loops are now operating simultaneously: (1) rising freight rates → partial cargo suspensions → further contraction of available shipping capacity → further freight rate hikes; (2) surging insurance premiums → expanded avoidance zones adopted by shipowners → further shrinkage of effective shipping capacity → more cargo backlog; (3) declining Middle East orders → supply chain shifts toward alternative sources → orders fail to return even after geopolitical tensions ease; (4) STS (ship-to-ship) transfer capacity approaching its physical limit → once the ceiling is reached, detour costs spike sharply. This is not a slow approach to a threshold—it is multiple accelerating loops mutually reinforcing each other. In Q1 2027, these acceleration signals will begin manifesting clearly in economic data.

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Turkish polymer buyers pivot to alternative origins amid Saudi delays

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