The Middle East war's effect on rated chemical players in the Middle East will depend largely on its duration and how long the Strait of Hormuz remains disrupted, S&P Global Ratings said in a report published on Thursday.

The report assumes that the Strait of Hormuz’s effective closure will ease during April, but notes that some disruption is likely to persist for months.

“In our view, the higher spot prices for fertilizers and petrochemicals caused by ongoing disruptions are unlikely to fully offset rapidly diminishing flows and inventories for exporters,” said S&P Global Ratings credit analyst Rawan Oueidat. “This could translate into EBITDA margin erosion and higher leverage.”

Geographical diversification and financial strength should buffer disruptions, for now. However, rating headroom could narrow if the situation persists or deteriorates, because it could cause significantly lower production and utilization rates, or potential further asset damage, it said. - TradeArabia News Service