Supply chain disruption just claimed a big victim: Sadara Chemical Company — the USD 20 bn JV between Saudi Aramco and Dow — pulled the plug on production at its Jubail complex. Sadara’s subsidiary announced the temporary shutdown in a filing to the Saudi Exchange yesterday, saying they have no clear timeline for when they’ll be able to restart.

The culprit? The ongoing conflict with Iran is strangling the region’s supply chains.

Management noted that bringing the plant back online is entirely contingent on “domestic and international factors,” while also warning investors that the freeze will drag down its financial results for the year.

Why it matters

The shutdown is a red flashing light for the global petrochemical industry. The flow of critical feedstocks like crude oil and naphtha through Hormuz has slowed to a trickle, and the Kingdom has already been forced to curtail its oil output. The pipeline designed to bypass the strait and pump crude to our western ports is reportedly maxed out at full capacity.

This will not just hurt Sadara: The Jubail complex typically churns out about 3 mn tons of plastics and chemicals every year, feeding everything from auto manufacturing to global packaging. Aramco CEO Amin Nasser has long championed the facility as a flagship project essential for squeezing more value out of Saudi oil and gas.

The math doesn’t look good: Some 30% of global ethylene supplies could be disrupted because of the conflict, according to BloombergNEF estimates.

Starting to see a pattern: The Sadara shutdown is the third major operational freeze by a listed company recently. It comes on the heels of Ades and Arabian Drilling suspending several of their offshore rigs.

What’s next? Pundits are warning that we’re likely just at the beginning of this wave. “I think we will see more shutdowns of petrochemical plants in the Middle East for the same reasons stocks will be building down the manufacturing chain,” Joseph McDonnell, oil analyst at Energy Aspects, told Bloomberg.

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