Naphtha Supply Disruption: How Feedstock Origin Is Reshaping Petrochemicals

Three findings from Mordor Intelligence’s supplier and contract tracking frame everything that follows. They establish how concentrated Gulf-origin resin supply actually was, what the cost gap between feedstock routes became at the peak of the disruption, and how much sourcing has already moved. The public price prints tell you the crisis happened. These tell you what it changed.

Global logistics have become uncertain, with up to 50% of polyethylene supply either offline, constrained, or being impacted.

– Jim Fitterling, CEO, Dow; March 2026

What the evidence supports, and where it stops.

1. 1

   Feedstock exposure, not elimination. Roughly 29-30% of global LPG and more than 37% of East Asian seaborne naphtha normally transit Hormuz. These are exposed volumes, not measured disrupted volumes; actual curtailment varied over time and was severe but not total.
2. 2

   Asian run cuts, plant by plant. South Korea’s petrochemical operating rate fell to roughly 55% at the end of March before recovering to about 75% by the end of May, depending on the operator. Specific producers in South Korea, Japan, Taiwan, Vietnam, and Indonesia cut runs or declared force majeure; these were company- and plant-specific actions, not uniform national ones.
3. 3

   US ethane retained a relative advantage. Some US operators achieved utilization above 90%, with a feedstock cost advantage over naphtha. But the initial PE price spike had substantially reversed by late June, so this is not continuing sector-wide pricing power.
4. 4

   China’s coal-to-olefins base is real but smaller than often cited. China had roughly 13.42 Mt/y of coal-to-olefins capacity in 2024 (about 15% of combined domestic ethylene and propylene output, excluding stand-alone MTO), and site-specific cost advantages during high-oil-price periods, not a verified sector-wide 30% edge.
5. 5

   Rationalization may accelerate; the cycle has not been declared over. The disruption tightened regional balances and may speed capacity closures, but Asia’s structural overcapacity and its rationalization programs predate February 28. Available evidence does not establish that the oversupply cycle has structurally ended.
6. 6

   Recovery is measured in quarters, as a scenario. Dow’s CEO estimated in March that clearing the post-reopening logistics backlog could take 250 to 275 days. That is a company scenario estimate, not confirmation of a guaranteed global resin shortage through 2027.

The fractured supply chain behind the petrochemical feedstock shortage runs like this. Middle East producers ship naphtha and LPG through the Strait. Asian steam crackers, concentrated in South Korea, Japan, China, Taiwan, India, and Singapore, convert that feedstock into ethylene and propylene, the building blocks of packaging, automotive parts, medical devices, electronics, and construction materials. After February 28, Hormuz-sourced flows to that chain were sharply curtailed. Asia did not lose its feedstock entirely: it retained domestic refinery output and non-Gulf imports. But the US and Europe together could replace only around half the normal Gulf naphtha volume, so the shortfall forced inventory drawdowns and plant-specific run cuts rather than a clean substitution.

The Gulf supplies roughly 60% of Asia's naphtha imports, about 4 million tons per month- the core of the Asia naphtha supply disruption this brief tracks. South Korea sourced over 50% of its naphtha from the Middle East. Japan’s exposure depends on the denominator: Japan imported roughly 60% of its naphtha, with more than 70% of those imports originating in the Middle East, which works out to about 42% Middle East exposure on a total-supply basis.

Naphtha reached a record near USD 1,300 per ton in March. Relative to the chart’s January value of about USD 720 per ton, that is roughly an 80% increase. It eased through June as ADNOC found workaround routes through Oman. The price correction does not undo the damage: for Asian crackers whose margins were already thin, the March spike forced run cuts and brought forward shutdown decisions. But those closures should not be attributed to the price shock alone.

“Quantifying the Strait of Hormuz goes beyond crude; the daily passage of roughly 1 million barrels each of naphtha and LPG represents the foundational feedstock for global olefin production. Any disruption here is less about short-term price fluctuations and more about a structural supply shock to the primary building blocks of the chemical industry.”

by Himanshu Vasisht, Senior Manager, Energy & Chemicals, Mordor Intelligence

The polyolefin complex, polyethylene and polypropylene combined, is a USD 257.61 billion segment in 2026, on track for USD 363.39 billion by 2031 at a 7.12% CAGR. Asia-Pacific commands 51% of global polyolefin consumption, with packaging at 58% of end-use. The naphtha shortage impact on petrochemicals is visible precisely in that chain: this is the segment that ran on emergency feedstock rationing through the spring.

On recovery timing: some industry commentary has suggested Middle East polymer exports could take more than a year to normalize after a reopening, but that duration is scenario-dependent and has not been independently established. This brief, therefore, uses Dow’s more clearly attributed 250 to 275-day backlog estimate as an illustrative scenario, not a forecast.

The regional picture is real, but it only holds up on a common basis. Any credible cross-route comparison has to rebuild every pathway in a single unit, such as USD per tonne of ethylene, using dated feedstock prices, yields, energy costs, co-product credits, and utilization. Comparisons that set Henry Hub gas, a coal-to-olefins oil-price threshold, and Brent crude against each other on one axis are not comparing production costs at all. The figures below are stated on that common basis.

The United States retained the clearest relative advantage, and it was winning before February 28. But note the reversal: US PE spot prices spiked in the first quarter and then substantially retraced by late June. A single grade, quoted on one consistent basis, shows both movements.

The Golden Triangle Polymers joint venture between Chevron Phillips Chemical and QatarEnergy is commissioning its USD 8.5 billion Texas complex, 2 million tpy of HDPE, into a tight PE market, with full operations targeted for 2027. QatarEnergy’s US assets are ramping even as its Qatar operations remain under a March force majeure, whose subsequent status was product- and contract-specific rather than a blanket declaration.

China is the second beneficiary, and its advantage is more structural. Its coal-to-olefins and methanol-to-olefins base gives it a parallel, domestically fed olefin stream that most of Asia lacks. The scale is specific: about 13.42 Mt/y of CTO capacity in 2024, roughly 15% of combined domestic ethylene and propylene output. European crackers sit in the middle, where LyondellBasell declared commercial force majeure on certain European obligations in March, a contracting action driven by cost-price divergence rather than confirmation that a specific Rotterdam plant halted.

These shifts are not abstract. When the disruption hit, procurement teams in packaging, automotive, and medical devices had to make sourcing decisions in days, most without visibility into whether their resin suppliers ran on Gulf naphtha, US ethane, or Chinese coal. One engagement illustrates the gap: it is the method, not the price outcome, that matters.

Packaging is the first downstream fracture point. PE accounted for 41.85% of plastic packaging by volume in 2025, with PP the fastest-growing resin, growing at a 5.55% CAGR. In a 16 March survey of 37 responding Korean plastics companies, about 70% reported notices of possible reductions or suspensions in resin supply, and about 92% reported price-increase notices. That is acute short-term concern from a small sample, not proof of a permanent industry-wide shortage, and Korea’s operating rate later recovered.

The medical and pharmaceutical chain is the more serious second-order risk. Petrochemical-derived materials, including PP, PE, and PVC, are used in syringes, infusion systems, gloves, and medical packaging. Japan established a medical-supply task force in response to the disruption. This is a supply-risk scenario worth planning for, not evidence that every resin-importing country faced an active healthcare crisis; Japan later reported that naphtha procurement recovered to about 85% of normal.

On May 13, 2026, India approved a USD 4.4 billion financial outlay for new surface coal and lignite gasification projects, with assistance capped at 20% of eligible plant and machinery costs. It builds on the USD 1.0 billion program approved in 2024, under which eight projects with USD 731 million earmarked were already under implementation. Two points of scope matter. USD 4.4 billion is a scheme outlay, not actual investment or disbursement, and private-sector participation is not new, since the 2024 program already covered private applicants.

The scope is narrow. Surface gasification produces syngas and downstream products such as methanol, ammonia, and urea. It does not, by itself, establish coal-to-olefins capacity: olefin output would require project-specific methanol-to-olefins units, and India would retain exposure to crude, naphtha, LPG, and products regardless. The third-order thesis is therefore narrower than it first appears: India is funding a syngas-chemicals base that could reduce some import dependence over time, rather than building a CTO/MTO olefins complex that would end its reliance on the Gulf and China.

The Mordor Intelligence India Plastics Report values the India plastic segment at USD 47 billion in 2026, growing to USD 63.69 billion by 2031 at roughly a 6.27% CAGR.

The defensible conclusion is narrower than the headlines suggest. The variable that governed cracker competitiveness for forty years, feedstock cost, has not been replaced. It has been joined by a second criterion that most models did not carry: feedstock-origin security. Competitiveness still depends on integration, yields, product slate, energy costs, logistics, utilization, and market proximity. What changed is that a stand-alone naphtha cracker with no feedstock-diversification pathway now carries a risk it did not price before, and that risk is site-specific rather than uniform.

A defensible feedstock-security comparison needs one consistent unit of analysis and defined, dated metrics. Composite scores built on overlapping or undefined axes cannot support a ranking, however precise they look. The comparison below therefore holds to a single unit and states its thresholds.

S-Oil’s Shaheen project in Ulsan illustrates the point. It is a KRW 9.258 trillion, Saudi Aramco-backed, integrated refinery-to-chemicals complex adding 1.8 Mt/y of mixed-feed cracking, initiated in 2023, so it predates and was not designed in response to the Hormuz crisis. As of late 2025, it reported about 97% engineering and 73.3% construction completion. It offers greater feedstock integration than a stand-alone cracker, but its steam cracker still consumes naphtha, LPG, and off-gas; it is not direct crude-to-ethylene production.

Five risk-management considerations derived from the disruption. Quantitative assumptions are identified as scenarios and should be refreshed before implementation.

1. 1

   Map resin exposure to feedstock origin.

   Organizations with material resin exposure should map suppliers, production sites, feedstock pathways, logistics routes, and inventory buffers where verifiable. Because a supplier may draw from multiple crackers, traders, or toll manufacturers, identify multi-plant and trader-supplied volumes separately rather than assuming a one-to-one supplier-to-feedstock link. Mordor Intelligence’s Polyolefin Report breaks down production by feedstock type, geography, and operator.
2. 2

   Evaluate US ethane-based supply as a strategic sourcing option.

   US ethane-based producers retain a relative feedstock advantage over many naphtha-based producers, but its magnitude should be measured with Mont Belvieu ethane and a consistently defined naphtha or crude benchmark, not Henry Hub, and no historical-record claim is warranted given the late-June price reversal. Mordor Intelligence’s Naphtha Report tracks feedstock economics and flow shifts by origin.
3. 3

   Stress-test packaging and medical supply chains with grade-specific scenarios.

   Model high, base, and low resin-price scenarios over 3, 6, and 12-month horizons, and treat pass-through explicitly by contract, inventory cycle, and resin share of finished-product cost rather than assuming a fixed 50 to 100% pass-through. Plastic packaging accounts for roughly 58% of PE and PP consumption in Mordor Intelligence’s market model.
4. 4

   Monitor China’s CTO and MTO capacity as competition and supply, compared on a common basis.

   Track Chinese coal-to-olefins and methanol-to-olefins capacity, comparing site-level costs in a consistent USD per ton of olefin boundary that includes coal or methanol, utilities, transport, co-product credits, and environmental costs. No sector-wide 30% advantage is assumed, and the capacity base is about 13.42 Mt/y CTO. Mordor Intelligence’s Polypropylene Report tracks Chinese additions and PP trade flows.
5. 5

   Treat Middle East PE and PP assets by verified plant status, not as uniformly impaired.

   These assets face elevated logistics and sales risk, but status varies: Borouge maintained high Q1 utilization and began commissioning Borouge 4 units in April, and Borouge 4 adds 1.4 Mt/y at Ruwais, taking site capacity toward about 6.4 Mt/y as units ramp through 2026, with separate optimization projects targeting more than 0.2 Mt/y by 2028. Mordor Intelligence’s Middle East Polyethylene Report covers the segment.

Follow the molecule. Procurement teams that knew their resin supplier but not that supplier’s feedstock origin discovered the gap when Yeochun NCC declared force majeure in March. Public and licensed data can substantially improve that mapping, though some plant inventories, contract allocations, and supplier-specific sourcing may remain estimated or unavailable. Most chemicals procurement functions are built to track prices, not origins, and to respond to a force majeure notice rather than anticipate the inventory depletion that made it inevitable. Mordor Intelligence’s Value and Supply Chain Analysis starts where most supplier audits stop, at Tier 2 and Tier 3, mapping component-level flows from crude origin through cracker, converter, and end-use, while its Commodity Price Trend and Competitive Benchmarking work track feedstock economics and relative cost position by origin.