Redrawing routes: GCC’s next-gen supply network
By Sourasis Bose, Senior Reporter – Chemicals; and Utkarsh Mishra, Olefins & Polyolefins Lead Consultant – Asia, Argus
“There are decades where nothing happens; and there are weeks where decades happen.”
While there may be doubts over the origin of this quote, there can be no doubt that these words ring true now.
The closing of the Strait of Hormuz did not just cut oil flows. It disrupted supply chains connecting the Gulf to the rest of the world, with effects extending well beyond oil flows. These repercussions are likely to persist beyond the immediate reopening of the strait.
The impact on the petrochemical sector has been especially pronounced. Argus estimates that around 14mn t/yr of polyethylene normally transits the Strait of Hormuz. The closure is impacting an estimated 15% of global PE supply, cutting average global operating rates by 5%. For polypropylene, Argus estimates that about 6 million t/yr normally transits through the strait. The closure is likely affecting around 9% of global PP capacity.
Restrictions are pressuring polymers importers dependent on Middle Eastern supply, especially in Asia, to look for alternate sources to meet their needs.
Producers are moving cargo through Saudi Arabia’s west coast ports and eastern and northeastern Arabian Peninsula ports, including Fujairah, Sohar and Duqm. These routes are functioning well, but they were not originally designed to absorb this level of sustained, system‑wide rerouting.
Every crisis presents an opportunity to evolve. The disruption has highlighted that certain external geopolitical developments remain beyond the direct influence of GCC states. However, they can invest in key infrastructure projects that would help offset the impact of similar setbacks in the future.
Intermodal network
Recent disruptions have exposed a structural vulnerability within the Gulf’s otherwise robust infrastructure—its limited capacity to move large volumes of polymer products inland and across borders when essential maritime routes are closed.
Trucking is handling what it can, but the conflict has underscored the need to complement trucking with more efficient modes of transport such as the railway network in North America, which is deeply integrated with industrial belts and key ports and can move large volumes of cargo efficiently.
In the United States alone, freight rail accounts for roughly 40% of long‑distance ton‑miles. The present crisis shows the strategic importance of similar rail infrastructure as an efficient risk‑mitigation tool rather than merely a way to lower emissions.
An interconnected rail network would give Gulf producers far more export options and allow them to bypass naval chokepoints and re‑route cargo during periods of geopolitical uncertainty.
GCC governments are already developing rail projects that could offset risks linked to the strait of Hormuz. Saudi Arabia’s Landbridge project is designed to link Jeddah on the Red Sea with Dammam and Jubail on the Gulf coast, putting an east-west corridor in place that sidesteps the strait entirely. The crown jewel of this project is a new 900 km railway line between Jeddah and Riyadh. While it was first announced in 2004, local media points to 2034 as a possible completion date.
GCC states have been working toward a network running from Kuwait City to Muscat through Saudi Arabia, Bahrain, Qatar and the UAE. That project was originally due in 2018. It is now not expected before 2030.
The strategic value of this network will depend heavily on its integration with key ports, particularly Fujairah in the UAE and Duqm, Sohar and Salalah in Oman. These ports offer alternative gateways outside the Strait of Hormuz and, crucially, outside the Bab el‑Mandeb Strait, another potential choke point as the attacks in 2024 showed.
Delays to these projects risk prolonging the region’s exposure to geopolitical disruptions. From an industry standpoint, sustained engagement with policymakers will be essential to ensure that timelines are met and that freight requirements including access to ports and industrial zones, are built into network design from the start, not bolted on later.
Beyond polymers, improved rail connectivity would also support exports of a wider range of essential goods. Plastics producers and fast-moving consumer goods companies have already cut operating rates because they cannot get products out of the Middle East. A strong intermodal network would give the region a scalable alternative to trucking and take pressure off road networks that were not originally designed to handle such sustained volumes.
Port infrastructure development
Logistics challenges have been compounded by port infrastructure constraints, particularly limited warehouse capacity and tight berth availability on both the west and east coasts of the Arabian Peninsula.
Some market participants observed that dwell time at Jeddah has jumped to over two weeks from three to five days under normal circumstances. Vessel diversions to Oman jumped 3,500% in the week Hormuz effectively closed, as per maritime intelligence firm Windward.
Port‑adjacent storage facilities are under severe pressure due to widespread cargo rerouting. On the west coast, utilisation at key hubs has climbed sharply. On the eastern Arabian Peninsula, ports face structural constraints when absorbing sudden, large‑scale volume surges.
For polymer producers, these constraints can translate into production adjustments and challenges in meeting delivery schedules. The solution is not just more terminal space. It requires storage, berthing and hinterland connections all being upgraded together, rather than just fixing one piece of the puzzle.
Takeaway
Despite the disruption and rising freight and insurance costs, GCC producers continue to export to different regions of the world. Even Asian buyers have indicated that they are willing to pay higher freight and insurance rather than walking away from Gulf supply. Customers still need the cost efficient and differentiated polymer grades offered by GCC producers that are harder to find elsewhere.
The crisis draws a clear distinction between demand risk and logistics risk. Demand for Middle Eastern petrochemical exports is unlikely to weaken in the near term, given the region’s cost advantages and established customer relationships. The more immediate challenge lies in ensuring that products can reach end markets at the times of geopolitical stress.