Japan, South Korea, and other big Asian economies have been dealt a blow by the Iran war’s disruption of naphtha imports—all except China, which has weathered the crisis thanks to its diversified supply networks.

“The recent blockade of the Strait of Hormuz has emerged as a major crisis that exposes the Asian petrochemical industry’s structural vulnerabilities,” said Baek Jong-hoon, acting chairman of the Korea Chemical Industry Association and CEO of Kumho Petrochemical, at an industry event in Fukuoka, Japan, last month.

The de facto closure of Hormuz, through which about 20% of global crude oil exports transit, has hit Asia the hardest. Over 80% of crude oil passing through the maritime chokepoint was bound for Asian markets, according to the US Energy Information Administration.

Many Asian countries, including Japan and South Korea, rely heavily on imported naphtha, produced when crude oil is refined, to make chemicals for plastics, inks and other products.

Japan has cut production at ethylene plants that use naphtha, while some plants in South Korea and Vietnam have been shut down. All these countries are trying to maintain supply chains by procuring naphtha from outside the Middle East.

But China, which boasts the world’s largest chemical production capacity, is feeling less of a pinch. Its crude oil sources are less concentrated in the Middle East and include Russia. Chinese chemical companies also use feedstocks other than naphtha, including ethane derived from natural gas and coal.

China can continue to supply chemicals even if Middle Eastern naphtha supplies are cut off.

Prices of naphtha from outside the Middle East, which at one point doubled compared with before the conflict, have eased somewhat but remain about 30% higher. If this situation drags on, Chinese chemicals, which already have a price advantage, could dominate the market.

“The competitiveness of Asia’s petrochemical industry, including Japan, will further decline,” said a senior executive at a major Japanese chemical company.

Asia’s petrochemical industry has long suffered from a glut of cheap imports from China. Baek said the current Middle East crisis is a double blow to the industry, which was already struggling from declining profitability.

South Korea, which has higher production capacity than Japan, is promoting the consolidation of ethylene plants under government leadership.

In Thailand, state-owned oil company PTT and Siam Cement Group, the country’s largest materials maker, said in April that they will explore merging their basic chemicals and commodity-grade plastic businesses.

“Even before recent disruption, the sector had already been shifting toward leaner capacity, higher utilization rates, and greater emphasis on specialty and high-value products,” said Toasaporn Boonyapipat, chairman of a Thai petrochemical industry association. “Today, that transition is moving faster and with greater urgency.”

In response to disruption caused by the Middle East conflict, the Japanese government has spearheaded POWERR Asia, a proposal to work with Asian countries on resource supply chains.

“In an era defined by geopolitical uncertainty, overcapacity, and the urgent call for climate action, collaboration is no longer a choice, it is essential,” said Tsao Mihn, chairman of a Taiwan industry association and chairman of Formosa Petrochemical. “Only by working together can we turn these challenges into opportunities.”

Japanese chemical companies have restructured to bring their capacity in line with shrinking domestic demand. But Koshiro Kudo, chairman of the Japan Petrochemical Industry Association and president of Asahi Kasei, said that “with unexpected changes possible, it is also necessary to have a buffer and respond flexibly.”

Kudo argues for a framework in which Asian economies facing similar challenges complement each other.

“Even just exploring risk diversification through exchanges with geographically close South Korea would be very meaningful,” Kudo said.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.