Iran Unrest Puts Pressure on Global Chemical and Fertilizer Markets

Recent social unrest in Iran, driven by worsening domestic economic conditions, has evolved into a complex situation shaped by both internal pressures and external geopolitical risks. Since late December 2025, merchants at Tehran's Grand Bazaar have staged strikes in protest against the sharp depreciation of the rial and a 72% year-on-year surge in food prices. The demonstrations quickly spread to major cities and university campuses nationwide.

In response, Iranian authorities implemented a series of measures, including the resignation and replacement of the central bank governor, the deployment of tear gas and water cannons to disperse crowds, and nationwide internet shutdowns. Despite these actions, tensions continued to escalate. By 13 January 2026, conditions in major cities such as Tehran had gradually stabilised, although sporadic clashes persisted.

Externally, the Trump administration in the United States repeatedly threatened military strikes and initiated evacuation procedures for relevant personnel and citizens, while Israel conducted targeted military deployments and strategic discussions. Although large-scale pro-government rallies have also taken place, the convergence of domestic eco  nomic strain and rising external pressure has pushed Iran into a highly uncertain and sensitive period, marked by intensifying internal contradictions and elevated risks of confrontation with major powers.

Against this backdrop, the potential impact on global chemical and petrochemical markets — particularly methanol, ethylene glycol, PX, and urea — has drawn close attention.

Methanol: Sharp Output Cuts and Export Uncertainty

Data show that Iran's methanol plants are currently operating at only around 16% of capacity due to winter gas restrictions, with more than 80% of local facilities shut down. As a result, exports to China have declined significantly. Market participants are closely monitoring developments around late February to March, when changes in local plant operations could directly affect supply flows to China.

Two potential scenarios are under consideration. Under the first scenario, prolonged internal unrest could obstruct the restart of idled units, further curbing exports to China and potentially delaying cargo arrivals. Heightened tensions could also disrupt operations at the Strait of Hormuz — a critical export route for Iranian methanol — extending loading and transit times and reducing arrivals at Chinese ports. Under the second scenario, if domestic conditions gradually stabilise, previously idled methanol plants may resume operations as scheduled, allowing exports to China to recover progressively. Separately, the United States' imposition of 25% tariffs on all Iranian trading partners remains a factor requiring continued monitoring and verification.

As of yesterday, Iran's methanol shipments in January 2026 stood at just 275,000 tonnes, marking a significant month-on-month contraction. Non-Iranian production rates also slipped to below 80% in mid-January. Preliminary estimates indicate that China's methanol imports in January may fall to approximately 1.01 million tonnes, with further declines possible in February.

Although a market rebound has squeezed olefin margins — prompting negative feedback, as reflected by mid-month olefin operating rates falling by 3 percentage points to around 78.6% — the expected sustained contraction in import volumes is likely to support the market through ongoing destocking at Chinese ports. This trend warrants continued observation.

Ethylene Glycol: Limited Direct Impact, Rising Cost Risks

Iran is among the world's major ethylene glycol producers, with total production capacity of about 1.795 million tonnes, accounting for 3.03% of global capacity. Meanwhile, China's expanding ethylene glycol capacity has led to a steady increase in domestic output. Recent import data show that China's primary ethylene glycol suppliers are Saudi Arabia, Canada, the United States, and Taiwan, China.

In 2025, China imported roughly 80,000 tonnes of ethylene glycol from Iran, representing just 1.07% of total imports. Although a maintenance shutdown at one Iranian facility has caused a slight reduction in supply and offered a short-term boost to market sentiment, the relatively small share of Iranian imports means the impact on China's ethylene glycol production sector remains limited.

That said, heightened geopolitical risks could influence crude oil prices, thereby affecting the cost base of naphtha-based ethylene glycol production and potentially shaping broader market dynamics. Ongoing monitoring remains necessary.

PX: Minimal Exposure for China

Analysts expect developments in Iran to have limited implications for China's PX market. Iran operates four PX units with a combined annual capacity of 1.41 million tonnes, accounting for only 1.58% of global PX capacity. Moreover, there is no PX trade between Iran and China, meaning any disruption to Iranian PX exports would not affect China's PX import flows.

While instability in Iran may lend some upward pressure to international crude oil prices — providing indirect cost support for PX — current market fundamentals remain strong. The PX sector is characterised by healthy margins, high operating rates, and stable spot supply. In addition, Sinochem Quanzhou's 800,000-tonne-per-year PX facility is scheduled to restart, while downstream polyester demand remains in the seasonal off-season. As a result, the PX market currently lacks sufficient momentum to follow crude-led price increases.

Urea: Global Implications Concentrated Outside China

China's domestic urea production fully meets internal demand, with capacity exceeding requirements and resulting in minimal reliance on imports. Total urea imports in 2025 are projected at just 0.23 million tonnes, with no supply sourced from Iran. Consequently, developments in Iran have no impact on China's urea market.

Internationally, however, Iran plays a significant role, accounting for approximately 5.42% of global urea production capacity and contributing an estimated 10–15% of actual exports, ranking second globally after Russia. The forced shutdown of Iranian urea plants carries three key implications for the global market.

First, it creates a supply gap, with the most pronounced effects expected in major importing countries such as India, Brazil, and Turkey. Second, it introduces volatility into international urea prices, as the loss of Iranian supply reduces availability in key markets and may drive prices higher. Third, prolonged outages could reshape global trade flows, potentially altering Iran's position in the international urea market as other exporting countries gradually fill the gap.

Overall, while the direct impact of Iran's unrest varies across product chains, sustained instability continues to pose material risks to global supply balances, pricing dynamics, and trade flows, underscoring the need for close and ongoing market surveillance.