Iran's Only MDI/TDI Plant Attacked, Middle East Supply Nearly Zero, Global Gap Widens

On June 8, 2026, the Karoon Petrochemical Complex in the Mahshahr Petrochemical Special Economic Zone in southwestern Iran was hit by a missile strike, destroying chlorine production units and storage facilities. The plant is operated by Karoon Petrochemical Company, a subsidiary of Iran's largest petrochemical holding company, PGPC, and is Iran's only producer of isocyanates (MDI/TDI), with an annual capacity of 40,000 tons of MDI and 40,000 tons of TDI. It is also one of the few producers of MDI/TDI in the Middle East.

Chlorine is a key raw material for producing phosgene, which itself is a core intermediate for manufacturing isocyanates. The disruption of chlorine supply directly cuts off the entire MDI/TDI production chain at this plant, and the impact may extend to other downstream manufacturers that rely on Karoon's output.

Prior to this incident, another Middle Eastern giant, Saudi Arabia's Sadara, had already been mired in a prolonged shutdown. On March 31, 2026, Sadara Chemical Company, a joint venture between Saudi Aramco and Dow Chemical, announced a full production halt at its Jubail integrated complex, with no estimated restart date – any resumption depends entirely on domestic and international conditions. Sadara has an annual capacity of 400,000 tons of MDI and 200,000 tons of TDI, accounting for more than 90% of the Middle East's MDI/TDI market share, along with supporting production of ethylene, propylene, and other basic chemicals.

With the attack on Karoon, MDI and TDI supply in the Middle East has nearly fallen to zero, creating a huge market vacuum.

The convergence of multiple supply shocks has triggered a wave of price increases. The MDI spot market has already adopted a flexible pricing mechanism updated every two weeks, replacing traditional monthly pricing – reflecting rapid upstream cost changes and the breakdown of contract pricing mechanisms.

Earlier, BASF, Covestro, and Huntsman successively announced MDI price hikes, and Covestro also declared force majeure for its North American MDI products. BASF's 50,000 tons/year MDI unit in India also experienced unplanned production issues, further tightening Asian supply.

Driven by the combined effects of the two major Middle Eastern producers being offline, sharply higher costs for overseas competitors, and ongoing supply chain tensions, the polyurethane industry has entered a strong price-hiking window.

Domestic MDI/TDI prices had risen noticeably in the early stage, but have recently seen a certain pullback. The main reasons are the fading of geopolitical risk premiums coupled with weak end‑demand, causing prices to give back some of their earlier gains. Future price trends will depend heavily on the evolution of the Middle East situation and the recovery of domestic demand.