Focusing on the Risks of the Strait of Hormuz: Safety of Ethylene Glycol Imports to China and Price Trend Predictions

February 28 news

I. The Core Pattern of China’s Ethylene Glycol Supply and Imports in 2025

In 2025, the import dependence of ethylene glycol was 27.7%. The total import volume was 7,720,400 tons, and China's production was 20,161,000 tons. Note: Import dependence = import volume / (domestic production + import volume)

China's production capacity continues to expand, with both coal-to-ethylene and ethylene processes advancing in tandem. The dependence on imports has significantly decreased compared to 2021, but high-end polymer-grade materials still rely on imports. Middle Eastern sources are irreplaceable in terms of cost and quality. (Imported goods mainly consist of high-purity, low-aldehyde, and stable batches, supporting the demand for high-end polyester and bottle chips. There is still a structural gap in domestic substitution.)

Import data show that the Middle East is highly concentrated, with Saudi Arabia, Iran, and Oman accounting for a combined 65.86% of imports. All these shipments pass through the Strait of Hormuz, exposing the supply chain to significant risks. North America provides a stable replenishment: Canada and the United States together account for 21.57%. These routes are not directly affected by the Persian Gulf, making them potential alternative sources.

II. Forecast of the Impact of Geopolitical Conflicts on China’s Ethylene Glycol Prices

Scenario One: Mild Conflict between the US and Iran, Maritime Channels Completely Normal

Core assumption: The conflict will be limited to localized strikes and escalating sanctions, without blockading the strait or disrupting shipping. Loading, settlement, logistics, and insurance will all proceed as normal, and shipping schedules and freight rates will remain stable.

Affecting judgment: Emotional impulses, with no substantial impact.

1. Supply side

Iranian supplies average about 48,000 tons per month, accounting for 2.1% of total supply. Under mild conflict conditions, most facilities remain operational and exports continue smoothly. Supplies from Saudi Arabia, North America, and the Asia-Pacific region are unaffected, and overall arrivals show no shortages.

2. Cost and Price

Oil prices have slightly increased (+$5-10 per barrel), leading to a cost increase of about 200-400 CNY per ton; the market is driven by a risk-averse sentiment, resulting in a short-term surge without sustained support.

3. Inventory and industrial chain

East China port inventories remain at normal levels, downstream polyester producers are purchasing on a demand-driven basis, cost transmission is limited, and prices fluctuate rapidly—without altering the underlying supply-and-demand fundamentals.

4. Conclusion

The ethylene glycol in China will experience short-term disruptions, with the market mainly characterized by a rebound followed by a pullback, and it does not constitute a trend opportunity.

Scenario 2: U.S.-Iran Conflict—Iranian goods completely blocked, while some Saudi goods can still pass through.

Core Assumption: The U.S.-Iran conflict is now centered on Iran’s immediate vicinity. Due to escalating sanctions and a shipping blockade, Iran’s exports have come to a complete standstill, with loading and settlement channels effectively closed. Saudi Arabia, relying on military escorts, continues to ensure some maritime traffic; although passage through the Strait of Hormuz remains restricted, it has not been completely blocked. As a result, Saudi Arabian shipments have seen a 30%–40% reduction in volume, while Oman’s shipments, affected by disruptions to transit routes, have declined by 20%–30%. The Red Sea route now carries certain risks. Freight rates on Middle East-to-China routes have risen, and vessel schedules are experiencing delays (7–12 days). War-risk premiums are moderately increasing.

Impact on judgment: Local supply contraction leads to a temporary rise in prices.

1. Supply side: A structural gap is emerging.

Iran: Monthly supply of 48,000 tons has been completely cut off, accounting for 2.1% of the total supply;

Saudi Arabia: Monthly imports average approximately 344,000 tons (annual imports totaling 4.1235 million tons). After a reduction of 30% to 40%, monthly imports would fall to between 103,000 and 138,000 tons.

Oman: Monthly imports average about 32,000 tons. After a reduction of 20% to 30%, the monthly average drops to between 6,000 and 9,000 tons.

Overall impact: The average monthly supply gap is 157,000 to 195,000 tons, accounting for 5.6% to 7.0% of total supply. As a result, the supply-demand balance has shifted from loose to tight.

2. Transportation and Costs: Slight Increase

Freight rates have risen by 100% to 200%, and coupled with a 150% to 250% increase in war-risk premiums, logistics costs have surged by 300 to 600 CNY per ton.

With oil prices rising by $10–20 per barrel, the cost of ethylene glycol produced from oil will increase by 400–800 CNY per ton.

The comprehensive import cost in China has increased by 700-1400 CNY per ton.

3. Prices, Inventory, and Trade Patterns

Price: Spot and futures prices have cumulatively risen by 400–800 CNY per ton. The price increase falls somewhere between mild and severe conflict, with relatively smooth fluctuation patterns.

Inventory: Inventory at major ports in East China is gradually being depleted, dropping from normal levels to a range of 400,000 to 500,000 tons. The spot market remains tight but has not yet reached a state of severe shortage.

Flow restructuring: The proportion of imports from North American sources increased from 21.57% to 25%-28%, partially filling the supply gap from the Middle East, and traders have increased their procurement efforts in North America.

4. Industry chain transmission

The increase in ethylene glycol prices is gradually being passed on to the midstream and downstream sectors, leading to a moderate rise in cost pressure for polyester companies. Some smaller polyester facilities may moderately reduce their load. The terminal textile and packaging industries are purchasing according to their needs and have limited acceptance of high-priced supplies, resulting in some resistance to cost transmission. The profit in the industry chain is moderately tilting towards the upstream.

5. Conclusion:

Under this scenario, China’s ethylene glycol market is showing a phased upward trend. The magnitude and duration of the price increase will depend on the pace at which Saudi supply disruptions are resolved. If Saudi throughput continues to decline, the situation could move closer to the impact of a severe conflict scenario; however, if the conflict eases, prices could easily fall back into a reasonable range.

Scenario 3: Severe U.S.-Iran Conflict, Shipping Channels Severely Impeded

Core assumption: The conflict will escalate comprehensively, with Iran imposing a blockade or conducting harassment in the straits, thereby increasing shipping risks in the Red Sea. Shipping from the Middle East will come to a standstill, cargo capacity will be rerouted, freight rates and war-risk premiums will surge, and delivery volumes will decline significantly.

Impact on judgment: Supply contraction + soaring costs, trending upward.

1. Supply side: Core supply sources are disrupted and reduced in volume.

Iran: Monthly supply completely cut off at 48,000 tons;

Saudi Arabia + Oman: accounting for 58.41% of imports, with arrivals halved, averaging only 190,000 to 300,000 tons per month;

Overall impact: The monthly average supply gap is 2.4 to 3.5 million tons, accounting for 10% to 15% of total supply, causing the supply-demand balance to rapidly shift toward tight equilibrium—and even tighter conditions.

2. Transportation and Costs: Dual Factors Elevating the Price Bottom

The route now bypasses the Cape of Good Hope, increasing the voyage duration by 15 to 20 days and raising freight rates by 250% to 500%.

War risk premiums have surged by 300%–500%.

Oil prices surged to $120-150 per barrel, raising the cost of oil-based ethylene glycol by 800-1200 CNY per ton in China.

The comprehensive import cost in China has increased by 1,100-1,800 CNY per ton.

3. Prices, Inventory, and Trade Patterns

Price: Spot and futures prices have cumulatively risen by 800–1,300 CNY per ton, with volatility significantly amplified.

Inventory: Rapid destocking at major ports in East China, dropping from normal levels to below 300,000 tons, resulting in tight spot supply.

Reconfiguration of supply routes: The share of North American sources has increased from 21.57% to over 30%, but the overall volume is still insufficient to fill the gap in the Middle East.

China benefits: the profit of coal-to-ethylene glycol significantly improves, the operating rate of facilities increases, and the pricing power of domestic production strengthens.

4. Industry chain transmission

Ethylene glycol price increases are being passed down, raising the costs of polyester chips, filaments, and bottle flakes, putting pressure on the terminal textile and packaging industries; with the import window closed, Chinese sources are dominating pricing, and stockpiling and withholding by traders are exacerbating short-term fluctuations.

5. Conclusion

Severe conflicts have led to a dual impact on supply and costs, causing Chinese ethylene glycol to enter a trend of rising prices, with the effects lasting until the channels are restored and the supply returns.

Core Conclusion

1. Middle Eastern supplies are the biggest risk: Imports account for over 65%, and a complete disruption of supplies from Iran alone could trigger a local shortage. A reduction in supplies from Saudi Arabia would further exacerbate the supply pressure, with the stability of the supply route directly determining the supply and demand situation in China.

2. China's supply resilience has improved: The import dependence has decreased to 27.7%, which can partially offset external shocks, especially in non-extreme conflict scenarios, effectively alleviating supply tensions.

3. North America serves as a crucial buffer: Canada and U.S. supplies are not directly affected by the Persian Gulf. When Middle Eastern supplies are disrupted, their share of imports can steadily increase, providing important support for market stability.

4. Multiple risk thresholds: In addition to the blockade of the Strait of Hormuz lasting longer than one month, a complete cutoff of Iranian supplies coupled with a reduction of over 40% in Saudi Arabian shipments would also trigger a reversal in the supply-demand dynamics. Particular attention should be paid to Saudi Arabia’s shipping capacity and actual shipment data.