Global Chemicals Feel Iran Conflict's Pinch
The Iran conflict is causing complex disruptions to global chemical supply chains, creating sourcing challenges and price volatility for crucial chemical ingredients and raw materials. This geopolitical event is forcing companies to rethink where they source supplies, potentially benefiting domestic producers ready to replace imports and those with strong raw material advantages.
Middle East Tensions Hit Feedstock Supply
The conflict in the Middle East, centered on Iran, is severely disrupting key chemical supply routes, especially trade through the Strait of Hormuz. This has caused significant price increases for essential raw materials like methanol, ammonia, sulphur, and benzene, directly impacting chemical makers worldwide. The chemical industry relies heavily on oil and gas for energy and materials, making it vulnerable to energy price jumps. Europe's chemical sector, already struggling with higher energy costs after the Ukraine war, now faces tougher competition due to these rising prices. The Strait of Hormuz, which handled about 138 vessels daily, has seen drastically reduced transit, halting millions of tonnes of petrochemical exports and forcing many producers to stop operations or declare contract disruptions.
Indian Firms Seek Opportunities in Import Gaps
Amidst these global supply chain vulnerabilities, companies focused on replacing imports are becoming more important.
Rubber Chemicals
NOCIL could benefit from investigations into anti-dumping duties on rubber chemicals, a sector tied to the automotive and tyre industries. However, short-term risks remain due to potential price spikes in raw materials like benzene and aniline, which are linked to oil prices.
Aliphatic Amines
Balaji Amines is a key player in replacing imports with its planned Di Methyl Ether (DME) plant, intended to substitute LPG. Its operations, however, face immediate risks from a lack of ammonia feedstock, which itself is affected by disruptions in LNG supply.
Green Ammonia Leadership
Reliance Industries (RIL) has strengthened its position through a significant $3 billion, 15-year agreement with Samsung C&T Corporation to supply Green Ammonia, starting in the latter half of FY2029. This deal supports India's goal to become a major green fuel exporter and aligns with the National Green Hydrogen Mission (NGHM), which aims to boost domestic production of green hydrogen and related products. India's efforts under the NGHM have also led to SECI signing agreements for 7.24 lakh tonnes per annum of green ammonia at competitive prices, showing strong government backing for clean energy.
Graphite Electrodes Face Higher Costs, Policy Shifts
Makers of graphite electrodes, essential for steel production using electric arc furnaces, are facing increased pressure from rising needle coke prices. US-based Graftech has already doubled its graphite electrode prices. While China's policy to curb overcapacity may bring more stable pricing to the electrode market, potentially helping Indian companies like HEG and Graphite India, the main challenge is the cost and supply of needle coke, a key raw material derived from oil refining.
Fluorochemicals Gain as China Restricts Supply
Indian fluorochemical companies, including SRF and Navin Fluorine, are well-placed to benefit from higher prices for R32 refrigerant gas. This price increase stems from China's supply restrictions under quotas, dictated by the Kigali Amendment to the Montreal Protocol, which aims to phase down hydrofluorocarbons (HFCs). Navin Fluorine's diverse contract manufacturing business offers a buffer against its core operations' cycles, while SRF's performance films and technical textiles segments are more exposed to global demand swings and trade policies.
Carbon Black Sourcing Varies by Company
For carbon black producers, how they source raw materials affects company performance. Himadri Speciality Chemicals uses coal tar, which offers some protection from crude oil price swings. In contrast, PCBL uses raw materials linked to crude oil, making it more vulnerable to geopolitical price changes.
Sector Risks Remain Despite Opportunities
Despite potential opportunities, significant risks persist across the sector.
Reliance Industries, while benefiting from its raw material advantages and focus on green ammonia, is still exposed to the general volatility of energy markets and the risks involved in executing its new energy projects.
NOCIL's performance is linked to the cyclical automotive industry and faces ongoing competitive pressures.
Balaji Amines' dependence on ammonia feedstock creates an immediate supply chain challenge.
Galaxy Surfactants, with its exposure to the Middle East and a trend of weak profit growth, faces valuation concerns, particularly with a high P/E ratio of 19.15 as of March 2026.
Himadri Speciality Chemicals has experienced an increase in its working capital cycle, which could affect its cash flow.
Navin Fluorine International trades at a high P/E ratio of over 57, indicating high market expectations that could lead to significant price drops if growth slows.
HEG and Graphite India are sensitive to global steel demand cycles and the volatile needle coke market.
Additionally, the risk of a global recession, possibly triggered by ongoing geopolitical instability, could reduce demand across all segments.
The ongoing anti-dumping investigations into Chinese chemical exports, while potentially benefiting domestic producers, also suggest a more protectionist global trade environment.
Policy Support Shapes Future Prospects
China's 'anti-overcapacity' policy, aimed at controlling production, is expected to lead to more stable pricing in the industry over the medium term. This could help improve margins and sales figures that have been low.
Companies like NOCIL, Balaji Amines, and RIL are seen as having potential as import substitution plays. Analysts also favor HEG and Galaxy Surfactants at current valuations.