VCI tracks far-reaching impact of Iran conflict on global supply-chains

Frankfurt, Germany – The impact of the Iran conflict is increasingly being felt across global supply-chains, with Asia “particularly affected” by the blockade of the Strait of Hormuz, German chemicals industry association the VCI has warned.

In a 25 March update, VCI said there is “increasing shortage” of intermediate materials such as ammonia, sulphur, naphtha and helium, which it said “essential” for the production of fertilisers, battery production, plastics and semiconductors.

“Force majeure reports are piling up. The first petrochemical plants in the region [Asia] have already been shut down... putting increasing pressure on global supply chains,” said VCI – citing a Germany Trade and Invest (GTAI) report.

According to the report, with “indispensable production and supplier networks” located in Asia, the shortage of raw materials has led to “an unprecedented price rally.”

“The prices for benzene, ethylene and methanol are rising globally faster than at any time in almost 20 years,” said the state-owned company which promotes business in Germany.

For German industry, GTAI noted, the disruption raises the risk that supplies from Asian production hubs could “grind to a halt.”

“Rising energy and raw material prices, longer transport routes and increased competition, especially from Chinese suppliers, could make procurement more expensive and further weaken the competitiveness of German companies,” the institute warned.

VCI also cited a recent analysis by the Kiel Institute showing that the disruption extends “far beyond the energy sector.” For instance, it noted, disruption is being “spread to food [supply] via chemicals and fertilisers.”