The global chemical industry is facing another major supply shock. But China’s position in this cycle is quite different from what we might expect. 

The disruption around the Strait of Hormuz is not only an energy story.

Oil and gas are both energy sources and feedstocks for the chemical industry. When energy and feedstock costs rise, the impact quickly moves downstream, from chemical producers to manufacturers and eventually to the entire supply chain.

Yet China appears to have a certain degree of resilience.

According to a recent Atradius industry outlook, China’s chemical production is expected to grow by around 1.6% in 2026, while exports remain relatively strong, particularly to Asian markets.

One reason is China’s relatively diversified energy and feedstock structure. Compared with some other Asian chemical-producing countries that are highly dependent on imported oil and gas, China has more alternatives, including coal-based feedstocks and a large domestic chemical supply chain.

But there is another side to the story.

China’s biggest challenge may not be energy supply, but overcapacity.

In several major chemical segments, including ethylene, polypropylene, ammonia and methanol, capacity has expanded faster than demand.

That creates an interesting paradox:

More capacity → stronger export capability → more international competition → greater pressure on margins.

So I don’t think the story is simply that China is becoming a stronger chemical exporter.

It is also a story about how Chinese producers will deal with excess capacity and increasingly competitive global markets.

For buyers, this could mean more sourcing options and continued access to competitive Chinese supply.

For Chinese suppliers, however, having capacity is no longer enough. The ability to offer competitive pricing, consistent quality, regulatory support and reliable delivery will become increasingly important.

Meanwhile, the picture looks quite different elsewhere.

The US benefits from relatively competitive domestic energy costs, while European producers continue to face higher energy costs and pressure from global competition.

The global chemical industry may therefore be moving into a period where regional cost structures matter more than ever.

China may remain highly competitive on scale and cost, but the next challenge is clear:

Can that manufacturing advantage be converted into sustainable margins and long-term global demand?

Source: Atradius, Industry Trends Chemicals, October 2026.