Beyond Oil: Other Raw Materials Affected by War in Iran

The war in Iran has caused the prices of several raw materials to rise. With the international trade becoming less certain, it is essential to identify the dependencies of businesses and exposed sectors.

In the short term, both sides have tried to end the conflict. But a lasting truce is struggling to emerge. Negotiations are still stuck on weighty subjects like uranium enrichment, the Strait of Hormuz, and the easing of sanctions.

In case things get worse, attention should be shifted beyond oil. The tensions will fuel inflation but will weigh on the margins of some companies, especially in sectors where the connection with the Middle East is less obvious.

Apart from oil, more specialized raw materials deserve attention, especially helium. This gas is closely tied to the semiconductor industry, which plays a crucial role in supporting market growth.

The disruptions affecting Qatari gas facilities and the Strait of Hormuz are already being felt. The helium market is heavily reliant on Qatari supply, with certain Asian economies being highly dependent on Qatari gas. For example, South Korea imports about two-thirds of its helium from Qatar.

Helium is crucial for chip manufacturing, particularly for its cooling qualities. The issue extends beyond semiconductors — it impacts the entire electronics chain due to the lack of credible substitutes and long-term storage challenges.

Major gas suppliers like Air Liquide, Linde, or Air Products currently hold pricing power that can positively impact margins as the conflict persists. However, they also face short-term operational constraints in diversifying their supplies.

For South Korean giants SK Hynix and Samsung Electronics, which supply around two-thirds of global memory chips, they had enough stocks to last until June. Nonetheless, they are paying premiums to secure their supplies. The potential impact on production is being felt, raising concerns about margins.

The current focus is on the semiconductor industry, which underpins the entire electronics sector, but helium also plays a role in other industries.

(Source: Reuters)

On a different note, pistachios are also impacted. The trend of chocolate bars filled with pistachios has become popular on social media, boosting margins for brands like Lindt.

According to Bloomberg, the price of pistachios reached an eight-year high in March due to increased demand and supply challenges from geopolitical and agricultural tensions.

Another raw material under strain is sulfur. It is less visible but crucial for several industries, such as fertilizer and the production of copper and nickel.

The Middle East accounts for about a quarter of global sulfur production. The rise in sulfur prices has historical highs, impacting industrial users significantly.

Iran is a major exporter of chemicals, including methanol, representing nearly a quarter of global production. Industrial sectors have exposure to derivatives of oil and gas like urea and naptha used in fertilizer and plastic production.

Asia, with China at the forefront, is particularly affected. Beijing imports a significant amount of Iranian oil, liquefied petroleum gas, methanol, and other products.

The oil sector remains the primary channel for transmitting the shock. However, dependencies on helium, pistachios, sulfur, methanol, urea, and naptha highlight that critical dependencies are often more subtle than imagined.