Global Chemical Inventories Hit Critical Lows as Over 200 Chinese Companies Suspend Quotations

Over the past few months, the chemical industry’s daily reality has shifted from “fighting for orders” to simply “fighting for raw materials.” Sulfur inventories could no longer last three weeks, lithium hexafluorophosphate stocks fell to barely seven days of downstream demand, and two North American MDI giants simultaneously suffered shutdowns. A chain reaction of supply disruptions has cascaded from upstream energy markets through the entire chemical value chain. By late May, the issue was no longer whether prices would rise by 10% or 20% — the real problem was that materials could no longer be secured at all. As inventories approached exhaustion, announcements of suspended quotations and sealed offers spread rapidly across the market.

The crisis began in late February. Tanker traffic through the Strait of Hormuz reportedly plunged by more than 98%, effectively severing a key artery of the global energy supply chain. According to data from the International Energy Agency, global oil supply fell to 95.1 million barrels per day in April, down 12.8 million barrels per day from pre-conflict levels. In just March and April alone, global commercial crude inventories declined by a record 246 million barrels.

Once crude supply tightened, downstream sectors immediately began to destabilize. Sulfur was among the first products to come under severe pressure. China relies on imports for more than 65% of its sulfur supply, with roughly half originating from the Middle East. Following disruptions to Middle Eastern production, total sulfur inventories at Chinese ports fell to only 1.08 million tons, down by half year-on-year. Based on monthly consumption of approximately 1.5 million tons, available inventories could support less than three weeks of demand. Granular sulfur prices at Zhenjiang Port surged to RMB 7,460/ton, up 195% year-on-year and more than 600% higher than levels seen in the second half of 2024. At least seven companies, including Shandong Huifeng Petrochemical, Changyi Petrochemical, and Hebei Xinhai Chemical, suspended quotations, while Huifeng Petrochemical reportedly halted operations entirely. Downstream phosphate fertilizer producers have already begun to feel the impact: Liuguo Chemical recorded a first-quarter net loss of RMB 90.38 million, while Chitianhua lost RMB 28.47 million.

Battery material markets are facing similar stress. Total industry inventories of lithium hexafluorophosphate are estimated at around 6,000 tons — barely enough for one week of downstream consumption. Spot prices jumped from RMB 98,000/ton in early May to RMB 176,500/ton within less than a month, representing an 80% surge. Many smaller producers had already shut down production lines after months of losses, while leading manufacturers prioritized long-term contract customers, leaving virtually no liquidity in the spot market.

May 19 became a symbolic turning point for the global MDI market. On the same day that Covestro declared force majeure on all North American MDI products, Dow also encountered disruptions at its North American MDI facilities. In both cases, the root cause was interruption of upstream carbon monoxide and chlorine supply chains. Roughly 95% of North American MDI capacity is controlled by five companies — Covestro, Dow, Huntsman, BASF, and Wanhua Chemical. With two major producers simultaneously affected, the supply gap could not be quickly replaced. Current estimates suggest that approximately 1.94 million tons of global MDI capacity are either operating at reduced rates or fully offline, accounting for nearly 20% of global capacity. Tosoh had already raised MDI prices by USD 500/ton effective May 1, while market prices have now climbed to around RMB 18,000/ton.

Olefins markets are also under heavy strain. More than 60% of Asia’s naphtha import routes have reportedly faced indefinite delays due to disruptions around the Strait of Hormuz. Naphtha cracking spreads surged from USD 108/ton before the crisis to a historic high of USD 466.85/ton. The South Korean government has officially classified ethylene and propylene as “crisis items.” Yeochun NCC decided to permanently shut down two cracking units, while Lotte Chemical closed a 1.1 million ton-per-year cracker. In China, major suppliers including Luxi Chemical, Shenghong Petrochemical, Huatai Fusheng, and SP Chemicals have continuously suspended quotations. SP Chemicals halted pricing altogether after inventories at its 780,000 ton-per-year unit fell to critically low levels.

Methanol supply-demand imbalances have also widened sharply, with monthly shortages now estimated at 500,000 tons. China relies on imports for around 20% of its methanol supply, with more than 70% sourced from the Middle East. As import volumes collapsed, more than a dozen companies — including Jinniu Xuyang, Dingzhou Tianlu, Qitaihe Longpeng, and Ningxia Baofeng — collectively suspended quotations, covering over 3 million tons of annual capacity.

Hydrofluoric acid shortages are beginning to impact the semiconductor industry in South Korea as well. Sulfur shortages have sharply increased sulfuric acid prices, and sulfuric acid is a key raw material in hydrofluoric acid production. South Korea imports approximately 90% of its anhydrous hydrogen fluoride from China. Procurement prices have already risen by around 40% since the beginning of the year, while Samsung Electronics and SK Hynix have reportedly been notified of further significant price increases for electronic-grade hydrofluoric acid during June and July.

As of last week, China’s chemical and energy sectors had collectively recorded more than 250 separate announcements of “quotation suspension.” The reasons vary widely: over 30% were linked to maintenance shutdowns, roughly 20% involved companies reserving output for internal use, more than 10% prioritized fulfillment of previous orders, while nearly one-quarter of companies provided no explanation at all, simply posting notices stating “temporarily not quoting.”

With inventories of sulfur, lithium hexafluorophosphate, MDI, methanol, and other critical chemical products falling below warning levels simultaneously, the market has effectively lost its layered buffering capacity. For chemical manufacturers today, the primary challenge is no longer production cost management — it is whether they can secure raw materials at all. Price fluctuations have become secondary.