WARS can change fortunes, and that is exactly what the Iran conflict has done for PETRONAS Chemicals Group Bhd (PetChem).
The local petrochemicals giant has been the clear winner, with a 93% – or RM22.4bil – rise in market capitalisation to RM46.5bil in March, far outperforming the broader Bursa Malaysia.
“Sell” calls on the stock have turned into “buys”, with target prices raised to RM6.58 per share by bullish brokers such as CGS International (CGSI) Research, up from about RM2 pre-war.
Forecast losses have turned into profits, with CGSI Research now expecting PetChem to post a net profit of RM2.2bil in financial year 2026 ending Dec 31 (FY26), compared with a net loss of RM2.14bil in FY25, thanks to improved pricing power.
For now, PetChem is riding the supply shock in energy and petrochemicals created by the conflict.
The war has literally flipped the market outlook from oversupply with weak pricing power to shortage and rising prices, due to supply chain disruptions caused by Iran choking energy supply lines through the Strait of Hormuz.
Red flags are appearing across the petrochemical markets.
Over 40 plants worldwide have declared force majeure as feedstocks like naphtha and ethane became scarce, with crude oil and liquefied natural gas (LNG) exports from the Persian Gulf limited or halted due to attacks.
More plants may follow if the war continues.
“Higher feedstock prices, or even potential lack of availability, are pushing up input costs or requiring a curb in production.
“On the other hand, soaring prices for petrochemical products are proving hugely supportive,” says Frederic Neumann, chief Asia economist and co-head of Global Investment Research Asia at HSBC.
He adds that the net impact depends on the availability of feedstock at comparatively low prices, which varies by economy and company.
Even if traffic through the Strait of Hormuz resumes, disruptions could linger, with shipping capacity and damaged production facilities likely taking months to fully normalise.
In this context, PetChem is in a sweet spot, as most of its feedstock is sourced locally from parent Petroliam Nasional Bhd (PETRONAS), except for the Pengerang Integrated Complex (PIC), which relies on naphtha from imported crude oil.
Cost pressures and fear of missing out are also driving high product prices.
Urea fertiliser prices have risen about 25% this month alone as buyers, such as India, scramble for alternate suppliers – planting cycles don’t wait.
PetChem is a major producer and exporter of urea, using ethane sourced from natural gas piped from offshore fields in the peninsula and the Malaysia-Thailand joint development area.
CGSI Research notes that urea prices in South-East Asia have climbed 47% to US$720 per tonne since the war began in late February.
Fertiliser players expect rising freight and feedstock costs to keep prices supported.
“Fertiliser is a seller’s market now, with buyers willing to secure supplies even at higher prices. Many producing countries like China have started to curtail exports. Others could do so in the months to come.
“Higher energy prices have also raised freight costs, which in turn feed into fertiliser prices,” says a fertiliser trader.
CGSI Research forecasts PetChem’s fertiliser and methanol business to see a 40% year-on-year growth in average selling prices in FY26.
With governments prioritising natural gas for urban needs following LNG supply cuts from Qatar, urea prices are likely to remain high until producers secure new gas supplies at reasonable rates.
The crude oil shortage from the Gulf has also limited production of feedstocks such as naphtha, prompting many Asian petrochemical companies to reduce output or mothball crackers.
This has pushed prices higher for products like ethylene and polyethylene, widely used in plastics for packaging, healthcare products, and automotive parts.
Companies like Dow Chemicals have capitalised, announcing a 100% polyethylene resin price hike from US$0.15/lb to US$0.30/lb from April onwards.
Polyethylene is produced from ethane, derived from natural gas, and these price hikes suggest more manufacturers may follow suit.
PetChem’s olefin, derivatives, and polymers segment could therefore benefit from higher pricing power, especially if its PIC, which uses naphtha as feedstock, is fully operational.
Chapter two of the war fallout story for the industry could be a period of “higher for longer”, despite rumours of peace talks between the warring parties.
Across the region, the petrochemical sector faces both opportunities and challenges.
Restarting downed production lines could take weeks, while Qatar LNG has said it may take three to five years to return operations to full capacity.
Buyers, however, have alternatives, including sourcing from the United States, now the world’s largest LNG exporter.
Meanwhile, Asia’s petrochemical industry could see a necessary consolidation.
Older, inefficient lines and crackers may be permanently shut down, helping reduce oversupply across the region.
Even if the Straits of Hormuz reopen, supply chains will take time to adjust.
Product prices may correct somewhat but are unlikely to return to levels seen at the start of the year.