How the Hormuz Disruption Reshaped the Americas Polyol Market

The disruption in the Strait of Hormuz, triggered by the outbreak of U.S.-Iran conflict on February 28, has entered a more restrictive and prolonged phase. Although a temporary ceasefire was announced on April 8, traffic through the strait has not normalised. On April 15, U.S. Central Command stated that the naval blockade of Iranian ports had been fully implemented, effectively cutting off most of Iran’s seaborne trade and leaving around 230 loaded oil tankers stranded inside the Gulf. At the same time, renewed Red Sea attacks have extended shipping routes, increased freight costs, and added pressure to already fragile supply chains. According to the EIA’s April Short-Term Energy Outlook, Middle East production shut-ins peaked at 9.1 million b/d in April, implying a substantial global inventory draw in Q2. With regional officials now expecting any comprehensive diplomatic resolution to take months rather than weeks, the disruption has become a key driver of polyol cost expectations for the rest of 2026.

 

1. Polyol Upstream Markets

• The Crude Price Timeline

WTI averaged $60.04/bbl in January and $64.51/bbl in February, closing pre-crisis at $66.96 on February 27. Prices then moved sharply higher. WTI crossed $70 on March 2, $80 on March 5, $90 on March 6, and reached $94.65 by March 9. After a brief pullback to $83.71 on March 10, prices rose again, moving through $98.48 on March 13 and closing March at $102.86, with a monthly average of $91.38/bbl. The peak came in early April at an intraday $117.63/bbl, the highest level in more than a decade. Brent moved above $127/bbl at the extreme.

The widening WTI-Brent spread was one of the clearest early signals of relative U.S. insulation. From a more typical $3-6/bbl, the spread widened to more than $14-15/bbl as internationally traded crude reacted more strongly than domestically anchored WTI.

As of April 17, WTI is trading around $90.5-93/bbl and Brent around $94.5/bbl. Prices have corrected from the early-April peak on intermittent ceasefire optimism, but remain highly sensitive to any signal that the blockade will persist. The EIA projects Brent peaking at $115/bbl in Q2 2026 before easing towards $88/bbl in Q4, assuming Hormuz flows eventually resume. On current timelines, that assumption still carries upside risk.

 

• The NGL Advantage: U.S. Production Accelerated During the Crisis

The EIA Weekly Petroleum Status Report shows that the U.S. refining and NGL complex did not contract during the crisis period. It strengthened.

U.S. crude production was broadly stable at 13,596 thousand b/d on April 3 versus 13,696 thousand b/d before the crisis. Gulf Coast refinery utilisation rose from 89.5% in the week ending February 27 to 95.6% in the week ending April 3, before easing slightly to 94.1% in the week ending April 10. That remained above the year-ago level of 92.3%. National refinery utilisation was 89.6% on April 10, compared with 89.2% before the crisis. Gulf Coast crude inputs rose from 8,678 to 9,218 thousand b/d.

NGPL production also moved higher. The four-week average reached 7,723 thousand b/d in the week ending April 10, up 9.3% year on year. Propane and propylene production reached 2,977 thousand b/d on a four-week average basis as of April 3, up 8.1% year on year. In other words, the U.S. NGL system increased output of the key feedstocks needed by the domestic polyurethane chain while the broader global oil system was tightening.

Inventory data points in the same direction. Propane inventories stood at 77.9 million barrels on April 10, 68% above the five-year average. Fractionated propane ready for sale reached 50.7 million barrels, up 172.8% year on year. Mont Belvieu propane fell back to $0.695/gal on April 10 from $0.835/gal the prior week, remaining only modestly higher relative to the much larger move in crude. U.S. natural gas storage ended the 2025-26 withdrawal season at about 1,900 Bcf, 3% above the five-year average. Overall, the NGL-based cost base in the U.S. remained firm and comparatively resilient.

 

• The Naphtha Divide: Why Asia Cracked and North America Didn’t

The core reason for the relative outperformance of North America lies in feedstock structure. U.S. petrochemicals rely heavily on NGLs, including ethane, propane, and butane from shale gas processing. These feedstocks do not depend directly on Middle Eastern crude flows through Hormuz. By contrast, Asian and European petrochemical systems are still predominantly naphtha-based and therefore much more exposed to disruptions in crude-linked supply.

When Hormuz tightened, the impact on Asia was immediate. Indonesia’s Chandra Asri declared force majeure. Japanese buyers cancelled naphtha tenders. Chinese PO producers, operating in a system that has added around 90% capacity since 2021, faced cost increases that moved faster than downstream pricing could adjust. Chinese polyether polyol producers suspended offers in early March as PO costs jumped. European producers faced a similar naphtha-linked squeeze, compounded by the region’s already elevated energy costs.

In the U.S., Gulf Coast propylene is sourced from FCC co-product output, PDH units using shale-derived propane, and steam cracking of ethane and propane. U.S. propylene rose by around 17.4% through late March, but that move was driven by domestic factors such as PDH maintenance and stronger propane exports, not by a direct supply shock. Before the crisis, North American propylene stood at $0.71/kg versus $0.93/kg in northeast Asia and $1.05/kg in Europe. That 24-32% cost advantage widened during the disruption and helped stabilise the North American PU chain.

 

• Propylene Oxide: The Hinge Between Feedstock and Polyol

PO is the key intermediate between feedstock markets and polyether polyols. Every kilogram of polyether polyol passes through PO. PUdaily price data from January to April 17, combined with U.S. Census Bureau export data for HTS 291020, points to two connected developments: a sharp cost inversion between North America and China, and an export-driven tightening mechanism that amplified the March polyol repricing in North America.

 

Pre-Crisis: China Cheaper, But Consuming It All Domestically

North American PO held at $1,290-1,350/tonne, or $1.29-1.35/kg, through January and February on a DEL bulk contract basis. Chinese East China PO averaged CNY 8,253/tonne in January and CNY 7,965/tonne in February, equivalent to roughly $1,138/tonne and $1,099/tonne respectively on a domestic DEL basis including VAT. This left North American PO around 17-20% more expensive than Chinese PO before the crisis.

That price gap did not translate into direct Chinese PO export pressure on North America. China is largely a domestic PO consumption market. The country’s polyether polyol industry absorbs most local PO production, so the competitive advantage appeared mainly downstream, in polyol exports rather than PO exports.

The U.S., by contrast, entered the crisis with a structural surplus position in PO. Exports reached 22,370 tonnes in January and 26,376 tonnes in February, with February up 37% year on year from 19,211 tonnes in February 2025. Full-year 2025 monthly exports ranged from 11,531 to 40,692 tonnes, underscoring how sensitive U.S. export flows are to international price spreads. That export flexibility became central once the crisis began.

 

March: Two Different Transmission Mechanisms

In China, March was a clear feedstock shock. The monthly average for East China PO rose to CNY 10,706/tonne, or about $1,477/tonne, up 34% from February. Spot prices moved above CNY 13,000/tonne by late March. This was a straightforward naphtha-chain transmission from higher crude into higher naphtha, higher propylene, and then higher PO. Because Chinese polyol producers are heavily dependent on domestic PO, the cost increase passed through directly into polyol pricing. The RMB 1,000/tonne weekly polyol jump in March reflected that transmission.

North America saw a different pattern. The March PO average was $1,331/tonne, essentially flat from February’s $1,320/tonne. There was no comparable feedstock shock. Instead, the tightening came through availability.

March U.S. PO export flows likely increased from year-ago levels as Europe became a stronger pull market. With European PO approaching $1.94/kg and North American PO near $1.33/kg, the transatlantic spread widened to about $0.61/kg. That created a strong export incentive for U.S. producers at the same time that domestic polyol producers were seeking forward PO coverage. The result was a tighter domestic spot market.

This helps explain the sharp move in polyol pricing from March 19 onward. Replacement costs were rising, but so too was competition for available barrels. The interaction of cost-push and supply-pull created a faster and more sustained move than either factor would likely have produced on its own.

 

April 1-17: The PO Cost Inversion Is Complete

By April 13-17, North American PO had moved to $1,400-1,450/tonne, or about $1.45/kg. That was a 12.4% increase from the pre-crisis floor and the first meaningful contract repricing of the year. Even so, it remained well below Chinese East China PO, which averaged around $1.78/kg over April 1-17.

 

	Pre-crisis (Feb)	Current (Apr 17)	Change
NA PO	$1.29-1.35/kg	$1.45/kg	+12.4%
China PO	~$1.10/kg	~$1.78/kg	+62%
Relative position	NA more expensive	NA cheaper	Cost inversion

 

North America moved by roughly $0.16/kg. China moved by about $0.68/kg. That reversal is important because Chinese polyol export competitiveness had rested in part on cheaper PO. For as long as Asian naphtha-linked propylene remains elevated, that advantage remains impaired.

 

The rise in North American PO to $1,400-1,450/tonne also suggests that European demand is beginning to feed into U.S. contract pricing. Going forward, the North America-Europe PO spread remains one of the key indicators to watch. If European costs normalise and the spread narrows below freight economics, U.S. export volumes should ease, domestic availability should improve, and the export-supported floor under North American polyols should weaken. On current assumptions, that appears more likely from Q3 onward than in the immediate term.

 

Taken together, the upstream picture suggests that North America did not experience the same feedstock shock as Asia, but it was not insulated from higher replacement costs or tighter availability. The result was not a supply crisis in the North American polyol market, but a sharp repricing as export pull, firmer PO contracts, and a narrower gap versus Asian material began to reshape buying decisions.

 

2. Flexible Slabstock Polyether Polyols

 

North American flexible slabstock polyols showed a clear but relatively controlled response to the Hormuz disruption. The market started the year at $1,580-1,660/tonne, peaked at $2,000-2,200/tonne in early April, and has since stabilised around $1,900-2,100/tonne. This leaves North America up by roughly 23-24% from its pre-crisis level. The increase was substantial, but still more moderate than in the main naphtha-linked markets.

That relative moderation matters for competitiveness, but the picture is not straightforward. China remains the benchmark market for flexible polyols because of its scale, liquidity, and central role in global trade. At the start of the year, Chinese FOB flexible polyols were still clearly more attractive on price, beginning around $1,168-1,219/tonne. Even after the market tightened, China remained the first reference point for many buyers, particularly in export markets where Chinese offers continue to anchor expectations.

However, China’s pricing position has weakened. Chinese flexible polyols rose to $2,240-2,290/tonne at the early-April peak and then eased to around $2,100-2,160/tonne by mid-April. That still represents an increase of roughly 75-80% from the beginning of the year. Once freight is added, the traditional price gap between Chinese and North American material narrowed sharply and, in some cases, disappeared. In that sense, China has not lost its role as the benchmark, but it has temporarily lost part of the pricing advantage that usually underpins that role.

West Europe also moved sharply higher. Prices began the year at around EUR 1,090-1,215/tonne, climbed to EUR 1,750-1,900/tonne at the peak, and have remained near that level in mid-April. This implies an increase of roughly 55-65%, showing how fully higher naphtha-linked costs have worked through the European polyol chain. India saw an even stronger increase, with flexible polyol pricing rising by roughly 74% from around $1,345/tonne to about $2,345/tonne. Against that backdrop, North America’s smaller increase stands out as a sign of relative resilience.

For buyers, that changed the competitive picture. At the start of the year, Chinese material was attractive not only because it was the benchmark, but also because it offered a clear price advantage. By April, that advantage had narrowed materially. North American material, while no longer inexpensive in absolute terms, became more credible as a competing origin because its cost increase was less severe and its feedstock base proved more resilient. The shift does not mean North America has replaced China as the market reference point. Rather, it means the gap between the benchmark market and North American pricing has narrowed enough to influence sourcing decisions more directly than before.

 

 

The key result of the Hormuz disruption was not simply higher polyol prices, but a change in relative market positioning. Asia absorbed the shock through naphtha and PO costs, while North America absorbed it more through export pull and firmer replacement values. That distinction matters. It explains why North American polyols still repriced sharply, but with less dislocation than in the main Asian markets. China remains the benchmark for global flexible polyols, but its pricing advantage has narrowed materially during this period. North America has not displaced China as the market reference point, but it has strengthened its position as a more competitive and more resilient alternative. If Asian feedstock pressure eases, China is likely to recover part of that lost edge. For now, however, the crisis has narrowed the competitive gap and made relative feedstock structure, rather than benchmark status alone, the more important determinant of polyol competitiveness.