Huatai Securities: Over a month of control of the Strait of Hormuz has deepened supply disruptions in the Asian petrochemical chain

People’s Finance Network, April 2 — In a research report, Huatai Securities said that as control in the Strait of Hormuz has continued for more than a month, an oil supply disruption has led to a widespread reduction in operating loads across Asia’s petrochemical industry chain. Cost increases and tighter supply have pushed product prices up broadly. The international diesel and jet fuel spread has surged; ethylene and propylene chain products have been blocked from passing through gains due to insufficient demand. The aromatics chain, meanwhile, has shown differentiated performance depending on the resilience of demand for each product. Asian countries face different risks due to variations in their levels of strategic oil reserves and differences in alternative energy sources, and China’s supply-chain disruption risk is relatively lower. At the same time, a contraction in industry capital expenditures and the “dual carbon control” policy will drive optimization of the supply structure, and this supply disruption is expected to accelerate the optimization of the regional petrochemical industry landscape in Asia. As uncertainty in the situation subsequently declines and downstream replenishment demand is released, it is expected to improve profitability in chemical products. Over the long term, this event will accelerate the strategic steps toward energy independence and controllability in China. It is expected that the development pace of oil-demand substitution routes such as modern coal-to-chemicals, green hydrogen, and new energy will speed up, thereby gradually reducing reliance on imported oil and gas.