Safeguarding our chemical-dependent industries

The chemical industry, built on a foundation of oil, gas and petrochemical feedstocks, underpins modern manufacturing. It supplies essential materials for plastics, textiles, pharmaceuticals, fertilisers and many other sectors. Today, the industry faces severe strain due to the ongoing war in the Middle East. The chemicals sector is particularly exposed because it depends on gas both to power plants and as feedstock, the raw material for many products. Each price spike therefore affects it twice. The Middle East is a key source of petrochemicals such as polyethylene, polypropylene, methanol and ammonia, which are essential raw materials for industries including plastics, coatings, textiles and fertilisers. In addition, products such as urea and sulphur rely heavily on feedstocks from the region. Instability there is disrupting the global chemical supply chain.

For Bangladesh, the implications are immediate and serious. The fertiliser segment has been particularly hard hit. Prices have risen by as much as 40 percent within weeks. The Bangladesh Chemical Industries Corporation (BCIC) has cancelled international tenders for 200,000 tonnes of urea amid supplier uncertainty. Four of five state-owned fertiliser plants are offline because of domestic gas shortages. This carries far-reaching consequences for agriculture and the country’s food security. The pharmaceutical industry, which imports nearly 90 percent of its active pharmaceutical ingredients (APIs) at an annual cost of more than $1.3 billion, is also facing rising production costs. Key pharmaceutical inputs such as paracetamol and metformin have jumped by between 50 and 90 percent. Moreover, any prolonged disruption would jeopardise the supply of essential, life-saving medicines and place additional strain on public health systems.

The country’s economy is highly reliant on imported chemicals and petrochemical derivatives, particularly for its dominant ready-made garments sector. Synthetic fibres, dyes and finishing chemicals are becoming more expensive and less predictable in supply. The crisis is compounded by energy pressures. Qatar, a key LNG supplier to Bangladesh, has faced production disruptions, while shipments through the Strait of Hormuz are becoming increasingly risky. Without a reliable and continuous gas supply, domestic industries cannot operate at full capacity.

The economic fallout is already visible. Global chemical prices have spiked, feeding into higher production costs across multiple industries. Inflation in Bangladesh faces renewed pressure. Export competitiveness erodes when lead times lengthen and input costs surge. Remittances from the Middle East, a crucial pillar of foreign exchange earnings, are also at risk of uncertainty as the conflict intensifies and economic conditions in host countries become more volatile. Given the gravity of the situation, Bangladesh needs to respond quickly and decisively. First, diversifying supply is now imperative. Government and industry must proactively secure alternative sources beyond the Middle East, targeting suppliers in East Asia, Europe and emerging petrochemical hubs. At the same time, establishing strategic stockpiles of critical inputs, especially fertilisers and key chemicals, would create a vital buffer against short-term shocks and buy time to implement longer-term structural solutions.

Second, targeted investment in domestic chemical capacity should be accelerated, with a focus on basic chemicals, recycling initiatives and stronger textile supply chain linkages. Gradually building local capability would reduce dependence on imports and enhance resilience against external disruptions. Third, a comprehensive energy strategy is essential. Expanding LNG supply contracts, accelerating investment in renewable energy, building strategic reserves and boosting industrial energy efficiency would help ease cost pressures and strengthen long-term resilience. Concurrently, businesses must overhaul risk management models, favouring longer-term contracts, broader supplier diversification and more flexible inventory management to survive and adapt in a more volatile global landscape.

In an interconnected world, distant conflicts can have immediate domestic consequences. For Bangladesh, the challenge is not merely to weather the storm, but to use this period of turbulence as a catalyst for building a more resilient, diversified and self-reliant industrial future.

The writer is the chairman and managing director of BASF Bangladesh Limited