For most of 2026, anyone exporting chemicals out of Asia has been quoting with one hand on the phone and the other on a freight screen that changed twice a day. By mid-October the picture is still not calm, but it is at least legible. This is our read of the data as it stands in the second week of October 2026, and what we think it means for buyers of glycols and other EO-derived chemicals over the next two quarters.
Freight, feedstock and insurance costs now move together. Reading them separately is how landed-cost estimates go wrong.
Where the Strait of Hormuz Stands in Mid-October 2026
The disruption began on 28 February 2026, when US and Israeli strikes on Iran escalated into a sustained conflict across the Gulf. Before that, roughly 135 vessels transited the strait each day, carrying about a fifth of the world's oil and a fifth of its liquefied natural gas.
The recovery has been partial and repeatedly interrupted. A memorandum of understanding signed between Washington and Tehran in June briefly reopened the waterway — crude transit climbed back toward 8 million barrels per day, and Lloyd's List Intelligence counted 69 vessels sailing out of the Gulf in the week to 21 June, up from 24 the week before. The MoU collapsed in early July and Iran closed the strait again. By 4 August only eight vessels transited, and crude flows were running at roughly 15% of pre-conflict levels.
Since the end of September, attacks have resumed at a pace that keeps underwriters nervous. On 11 October the UK Maritime Trade Operations office logged six vessels struck in the strait and the adjacent Gulf of Oman in a single day. As of mid-October, Tehran was reviewing a US proposal to reopen the strait within seven days, and Washington had signalled it would not strike Iran before the 3 November congressional midterms. That is the entire basis on which the market is currently pricing risk: a negotiation, plus an electoral calendar.
Two structural changes are worth noting because they will outlast any ceasefire. Iran established a Persian Gulf Strait Authority in May 2026 and now requires transiting vessels to file a declaration covering more than forty data points — ownership records, crew lists, owner and operator nationality. And according to reporting in The Wall Street Journal, Iran has demanded a transit toll of one US dollar per barrel. Whether or not that toll is ever collected, the paperwork burden and the political filter are now part of Gulf shipping.
The human and commercial cost is documented. The International Maritime Organization has recorded fourteen seafarer deaths and missile attacks on more than forty vessels. Allianz, cited by the Financial Times, put the figure at more than 1,200 cargo ships stranded with goods worth about USD 125 billion.
The Cost Stack: Bunker, War Risk, Charter
Exporters feel the strait through three separate lines on a freight invoice. All three moved.
Cost line | Pre-conflict | Latest observed (2026) | Source basis |
|---|---|---|---|
Hull war-risk premium | 0.25% of vessel value | ~5% of vessel value, peaked near 10%; March contracts written at 1% with 7-day renewal | Lloyd's Market Association, marine insurer statements |
VLCC day rate, Gulf–China | ~USD 208,000/day | Peaked above USD 1.035 million/day; Middle East route day hire reported above USD 1.4 million | Baltic Exchange assessments |
VLCC single voyage, US Gulf–China | — | Reported at USD 77 million | Market reporting, October 2026 |
VLSFO bunker, Singapore | — | EUR 941/tonne, up 223% since the start of 2026 | European clean-transport advocacy report, 28 March 2026 |
Industry-wide extra fuel spend | — | EUR 4.6 billion since 28 February; about EUR 340 million per day | Same report |
Brent crude | — | USD 103.53 September settlement; USD 105.40 on 13 October; touched near USD 110 on 8 September | ICE futures |
The tanker market is where the distortion is most extreme. Baltic Exchange data for the four weeks from 11 September to 9 October shows standard VLCC voyage earnings up about 64% on Middle East Gulf to China, 116% on West Africa to China and 148% on US Gulf to China. Monthly averages for September put the dirty and clean tanker indices up 281.5% and 198.5% year on year respectively.
Why does a chemical exporter care about VLCC rates? Because bunker fuel is shared. When very low sulphur fuel oil triples, every vessel class reprices — container ships, parcel tankers, bulk carriers. Fuel is roughly 30% of a container ship's operating cost, so a 10% move in crude shows up in the box rate within a quarter.
There is also a supply-side shock that has nothing to do with freight. In April 2026 Saudi Arabia's Jubail industrial city — around 60 million tonnes a year of petrochemical output, some 6–8% of global production — was struck over a wide area. SABIC declared force majeure on its 4.7 million tonne per year methanol plant and 1.8 million tonne per year styrene unit; the Sadara joint venture, with more than 3 million tonnes of polyolefin capacity, was temporarily shut down. Industry estimates put repair timelines at one to two years, with some capacity likely to exit permanently. On 10 September a drone attack closed Saudi Arabia's East-West pipeline for a period. And since 20 July the Houthis have declared a naval blockade on Saudi shipping through Bab el-Mandeb, putting a second chokepoint under pressure at the same time.
Container Freight: Europe Is Cooling, the Gulf Is Not
This is the part that surprises people. Despite everything above, container rates out of China to Europe have been falling since July.
Lane / index | Level, week to 9 October 2026 | Change |
|---|---|---|
SCFI composite | 3,664.11 points | +1.8 points (+0.05%), ending a two-week slide |
Far East – North Europe | USD 2,274 per TEU | +3.4% week on week |
Far East – Mediterranean | USD 3,002 per TEU | +0.2% week on week |
Far East – US West Coast | USD 7,584 per FEU | +0.08% week on week |
Far East – US East Coast | USD 10,524 per FEU | −0.04% week on week |
Asia – North Europe (Freightos) | USD 3,260 per FEU | −3% week on week |
Asia – Mediterranean (Freightos) | USD 3,555 per FEU | −2% week on week |
SCFIS Europe settlement index | 2,264.82 points (12 October) | −6.1% versus prior period |
China – Persian Gulf / Middle East | USD 6,489 per TEU (week to 30 September) | −1% week on week, but roughly 2.9× the Europe lane |
The reason Europe is easing is the Red Sea. Premier Alliance, the last of the three major liner alliances, announced in October that it was returning some services to the Suez routing, joining MSC and the other alliances that had already begun the shift. Around 30% of Asia–Europe voyages are now transiting Suez again, and each round voyage through the canal saves roughly 27 days compared with the Cape of Good Hope. Drewry's base case, published 8 October, expects Suez container transits to reach 80% of pre-crisis levels by February 2027.
Shorter voyages mean more effective capacity from the same fleet. Carriers are also adding ships: weekly deployed capacity on the China–Europe trade averaged about 300,000 TEU in October and is planned at roughly 330,000 TEU for November, an increase of about 10%. In the week to 12 October, deployed capacity was 277,297 TEU to Europe, 393,884 TEU to the US West Coast and 222,248 TEU to the US East Coast.
But the announced rate increases are not landing cleanly. Maersk's week-43 opening rate for Shanghai to North Europe was USD 3,300 per FEU against a declared target of USD 4,000, with settled business reported near USD 3,100. Ocean Alliance members clustered around USD 3,700. Premier Alliance services drifted to USD 2,750 and below. That spread — over USD 900 between carriers on the same lane in the same week — is a market where supply is returning faster than demand.
The Gulf lane is the exception. At USD 6,489 per TEU it remains the most expensive major trade out of China, because the risk premium there is not a Red Sea question. Liner war-related surcharges introduced since February have ranged from USD 1,500 to USD 4,000 per container on affected services.
Capacity is returning to the Suez routing faster than expected. Europe lane rates have fallen since July; the Gulf lane has not.
What Happened to Glycol Prices
The chemical side of the story is where the whipsaw has been most violent, and DEG is the clearest example.
Period | DEG, CNY/t | Driver |
|---|---|---|
January 2026 low | ~3,060 | Weak demand, ample import arrivals |
H1 2026 average | 5,621 (vs 4,620 in H1 2025, +21.7%) | Cost push plus tightening supply |
Mid-July 2026 high | 9,233 (benchmark series peaked at 11,866) | Middle East outages, port inventory near 4,300 t |
14 October 2026 | 6,333 | Import arrivals, producers cutting offers |
From the July high to 14 October, the benchmark has fallen about 46%. The published assessment on 15 October called it an oscillating market with a mild, slightly bearish pullback, noting successive ex-works price cuts from Sinopec East China, Zhongke Refining and Fujian Gulei, and a heavy inbound vessel schedule into Zhangjiagang that should rebuild inventory quickly.
Inventory is the tell
Prices lie; inventories rarely do. East China main-port MEG inventory was 953,000 tonnes on 30 March, 416,000 tonnes on 30 July, 142,000 tonnes on 31 August and 86,000 tonnes on 12 October. That is a 91% drawdown in six and a half months, and it happened while prices were falling — which means the market is clearing on volume, not on distress.
DEG stocks at the two main Zhangjiagang tank farms stood at about 8,700 tonnes on 12 October, with 1,148 tonnes dispatched that day. Thin. The bearish price signal and the thin physical position are both real, and they will resolve in one of two ways: either inbound cargoes land on schedule and the market rebuilds comfortably, or another Gulf incident delays them and the spot premium snaps back.
On the supply side, Middle East ethylene glycol operating rates were running near 57%, with Iran's Marun and BCCO units fully idle and Saudi Sharq trains at reduced load. Saudi Arabia supplies more than half of China's MEG imports, so any Gulf disruption lands directly on East China's waterfront. In May, East China import volumes fell about 55% month on month.
Demand Side: China's Export Engine Keeps Running
Against all of this, Chinese trade has been remarkably strong. Customs data for the first three quarters of 2026 shows total goods trade of CNY 39.94 trillion, up 18.8% year on year — the fastest pace for the period in five years. Exports reached CNY 23.2 trillion, up 16.4%. In US dollar terms, September exports rose 36.3% year on year with a trade surplus of USD 133.53 billion.
The structural shift matters more than the headline. Intermediate goods exports grew 29.2% between January and August, lifting their share of total exports from 47.5% in 2025 to 51.4%. China is increasingly selling the inputs that other countries turn into finished products — which is exactly the category chemicals sit in.
Two policy currents are worth watching. The EU's carbon border adjustment mechanism is now in force, and carbon-footprint accounting is becoming a de facto entry requirement for European buyers. And Beijing announced in October that the new-energy vehicle export tax rebate will be cut from 13% to 9% with effect from 1 April 2027 — a reminder that export rebate policy is an active lever, and that chemical lines are not immune from future adjustment.
Some shippers are also voting with their feet. The Yiwu-Xinjiang-Europe rail service has moved 200,460 TEU so far in 2026, a record for the period, and the Western Land-Sea New Corridor's rail-sea intermodal volume passed one million TEU on 6 October. Rail to Hamburg or Munich takes 12 to 14 days and costs more than sea freight, but for time-sensitive or higher-value chemical consignments it has become a genuine alternative rather than a novelty.
Three Scenarios for Q4 2026 and Q1 2027
Scenario A — Credible reopening
The strait reopens on a verifiable, publicly monitored basis and stays open. War-risk premiums compress from around 5% of hull value toward the 2% seen after the June MoU. Tanker rates normalise over one to two quarters. Brent drifts toward the USD 80 level that Goldman Sachs projects for 2027, and the IEA's expected 2027 surplus of 3.94 million barrels per day starts to bite. For chemical buyers: feedstock costs ease, Gulf-origin glycols return to the Asian market, and Chinese domestic prices face renewed import competition. This is the scenario in which locking long-dated fixed prices is risky.
Scenario B — Supervised status quo
The most likely outcome on current evidence. Transit continues at a controlled fraction of normal volumes under the Persian Gulf Strait Authority's declaration regime, with periodic incidents. War-risk cover stays elevated and volatile — the Lloyd's Market Association has described premium levels as simply "variable". Bunker costs stay high. Container rates on Europe lanes continue to soften as Suez capacity returns, while Gulf lanes stay expensive. For chemical buyers: expect DEG and MEG to oscillate in a wide band rather than trend, and expect freight quotes to be valid for days rather than weeks.
Scenario C — Re-escalation
Attacks intensify, or Bab el-Mandeb closes alongside Hormuz. Two chokepoints down at once is the scenario Allianz's marine underwriters have described as moving from theoretical to actual. War-risk premiums revisit the 10% ceiling, carriers suspend Gulf and Red Sea services, and the Cape routing becomes mandatory for Asia-Europe. The 27-day saving from Suez disappears and effective capacity contracts sharply. For chemical buyers: the July DEG spike looks modest in hindsight, and any unhedged Q1 requirement becomes a serious problem.
Our working assumption: Scenario B through Q4 2026, with a genuine possibility of A opening up in Q1 2027 if the current negotiation produces something verifiable. We are not planning customer commitments around C, but we are not writing contracts that assume it cannot happen.
What We Are Telling Customers Right Now
Shorten price validity, don't lengthen it. Seven to fifteen days is realistic for glycols in this market. Anything longer needs an index-linking or surcharge mechanism, and both sides should understand the formula before signing.
Separate the product risk from the freight risk. On FOB terms you control the ocean leg and can shop it. On CIF we control it and can often do better, but you lose visibility. Neither is wrong — just decide deliberately.
Book Gulf-bound cargo early. The Middle East lane is running at roughly three times the Europe rate and equipment availability is the binding constraint, not price.
Consider ISO tanks over drums for bulk liquid glycols. About a third more payload per container materially changes delivered cost when freight is elevated.
Keep a rail quote on file. Even if you never use it, having a 12-to-14-day alternative changes how you negotiate a delayed booking.
Build the carbon paperwork now. If you sell into the EU, CBAM-related data requests are arriving whether or not your product is in scope today.
Sources and Further Reading
Figures in this article are drawn from published market data and reporting current to mid-October 2026, including Shanghai Shipping Exchange SCFI and SCFIS releases, Baltic Exchange tanker assessments, Sunsirs and Oilchem chemical price series, Lloyd's List Intelligence transit counts, Drewry's Suez recovery modelling, the International Maritime Organization, Allianz marine underwriting statements, Lloyd's Market Association commentary, IEA oil market reporting and Chinese customs trade statistics.
War-risk insurance rates for Strait of Hormuz vessels rise amid renewed tensions
Strait of Hormuz shipping recovery could take weeks, tanker chief says
Shipping costs surge as Gulf conflict adds EUR 340 million per day to industry
Sunsirs — Chinese commodity price assessments (DEG, EO, MEG)
If you want a current landed-cost estimate for PEG or DEG on your lane, send us the grade, quantity and destination port and we will come back with freight, surcharges and insurance broken out separately so you can see exactly what you are paying for. Our export services page explains how we handle the documentation.
This article summarises publicly reported market data for information purposes. It is not investment advice, a price forecast or an offer to sell. Market conditions in the Gulf remain volatile; verify current rates and prices before committing.