Geopolitical Conflict Triggers Surge in Chemical Markets: LPG, Methanol, and MEG Export Prices Rise Sharply

Since March 2026, the global energy and chemical markets have experienced significant turbulence triggered by escalating geopolitical conflicts. Impacted by factors such as heightened tensions in the Middle East and disruptions to shipping through the Strait of Hormuz, export prices for key chemical products—including liquefied petroleum gas (LPG), methanol, and monoethylene glycol (MEG)—have surged in tandem with international market prices, demonstrating strong momentum even during the traditional off-season.

Supply Crisis Dominates, Driving LPG Prices Higher

Heightened tensions in the Gulf region, a core global LPG-producing area, have directly impacted international supply chains. Saudi Arabia’s April CP (contract price) expectations remained firm at around $580 per ton, with import costs at Chinese ports exceeding RMB 7,000 per ton in early April, hitting a new high for 2026. Driven by surging export demand, the U.S. market saw propane prices at the Mont Belvieu hub in Texas jump approximately 20% since the conflict began.

The domestic Chinese LPG market has also moved higher. As of early March, the average domestic propane market price reached RMB 5,025 per ton, up 6.1% from post-Lunar New Year levels. In the futures market, the Dalian Commodity Exchange’s (DCE) LPG benchmark contract fluctuated significantly due to cost pressures, hitting the exchange’s daily price limit in mid-March. As of March 19, the LPG main contract saw intraday gains exceeding 10%, with prices breaking through the RMB 6,300 per ton level.

Industry analysis points to supply-side factors as the core driver: approximately one-third of global LPG trade passes through the Strait of Hormuz, and disruptions to this key waterway have created a substantial supply gap. This has been compounded by domestic refineries reducing operating rates due to feedstock shortages, curtailing LPG production, while downstream industries such as PDH (propane dehydrogenation) plants, powder coatings, and related sectors, fearing further price increases, actively entered the market to replenish inventory, further fueling the price rally.

Methanol: International Trade Flows Halted, Casting Shadow Over Q2 Market

Methanol is one of the products most directly affected by this round of price increases. Iran, the world’s second-largest methanol producer and China’s largest source of imports, faces supply stability risks due to the conflict. Industry sources have indicated that the effective closure of the Strait of Hormuz has constrained 18 to 20 million tons per year of methanol supply from the Middle East.

“The total global methanol market is approximately 110 million tons, with actual international trade volume only around 55 million tons. Currently, these trade flows have been completely disrupted,” according to relevant analysis. Data shows that Iran exported over 9 million tons of methanol in 2025, while Saudi Arabia exported nearly 4 million tons. These volumes primarily flow to markets in China, India, and Europe.

As a result, methanol spot prices in Asia-Pacific and Europe have risen sharply. Transaction prices in the Chinese market have surpassed $300 per ton, while European spot prices are approaching $400 per ton. The domestic futures market reacted intensely, with the methanol benchmark contract rallying for two consecutive sessions, accumulating gains exceeding 10%, making it one of the leading products in this round of price surges. On the spot market, methanol prices climbed steadily from RMB 2,155.83 per ton in late February, hitting a high of RMB 2,575 per ton in early March.

MEG: Multiple Factors Converge, Becoming Most Sensitive Product to Event

Within the polyester industry chain, MEG has emerged as the product most directly impacted by the Middle East geopolitical situation. Data indicates that China’s MEG import dependence is 28%, with 65% of imports originating from the Middle East. In 2025, China imported 5.03 million tons of MEG from the Middle East, with Saudi Arabia alone accounting for 55%, followed by Kuwait and Oman at 5% each. Crucially, shipments from the three major MEG exporters—Saudi Arabia, Iran, and Oman—must all transit the Strait of Hormuz. This single-route transportation channel has amplified the impact of geopolitical events.

As of March 19, the MEG2605 futures contract had risen RMB 1,517 per ton from the end of February, a gain of 40.97%. On March 6, the MEG continuous main contract saw intraday gains exceeding 4%, reaching a high of RMB 4,399.00 per ton. Since the escalation of Middle East geopolitical tensions on February 28, the contract has accumulated weekly gains exceeding 18%.

The supply side shows a contraction both domestically and internationally. According to industry data, as of March 19, the overall domestic MEG operating rate fell to 58.05%, with integrated units operating at 55.71%. On the international front, constrained by plant force majeure events and significant vessel delays, the market widely expects MEG import volumes in April to experience a sharp decline.

Supply Chain Transmission Effects Emerge, Downstream Companies Face Pressure

The sharp increase in upstream feedstock prices has created a clear transmission chain. Numerous domestic and international chemical companies have issued price adjustment notices covering core products such as MDI, TDI, and TPU, with price increases spanning markets across Asia, Europe, North America, and the Middle East.

Concurrently, domestic chemical producers have also been raising product prices intensively. Taking products such as phenol, styrene, and chloroform in North China as examples, relevant companies have implemented price increases ranging from RMB 250 to RMB 500 per ton. The plastics sector has also experienced a wave of price hikes across the chain. ABS spot market prices have exceeded RMB 14,100 per ton, up nearly 70% from January. PP (polypropylene) raffia prices surged from RMB 6,663 per ton in early March to RMB 9,126.67 per ton by March 10, a gain of 36.97%.

Notably, midstream coating companies are facing significant cost pressures. Several coating manufacturers have already issued price adjustment notices, with some implementing a “quote per order” model to manage the uncertainty caused by volatile raw material prices.