Markus Steilemann, the CEO of the chemical conglomerate Covestro, predicts that the Iran crisis will lead to significant scarcity of certain raw materials. Although he cautioned that the situation is not yet at its worst, stating that transportation routes-including pipelines to the Red Sea and limited land transport-are still operational, he warned of increasing supply disruptions if these routes were further impaired. He anticipates that many supply chain failures will only become apparent in the future, suggesting that some product sectors might face acute or even temporary complete material outages in specific regions.
Despite the challenges, Steilemann noted that companies like Covestro could potentially benefit from the strained market. He explained that the prices of several chemical industry raw materials have risen significantly, not because production capacity was underutilized, but purely due to general lack of availability. He pointed out that certain nations, such as Japan and Korea, are currently impacted as they struggle to obtain enough physical raw materials derived from oil and gas, thus limiting their exportable output. Furthermore, some countries have reportedly implemented policies limiting production solely to domestic needs.
Regarding immediate action, Covestro is assessing alternative supply chains for specific, highly sensitive products. He highlighted the critical role of small material volumes, citing flame retardants as an example: even a minor shortage of such materials can prevent a product from meeting required specifications and renders it effectively unsellable.
However, Steilemann expects the more severe effects to manifest indirectly. He foresees growing consumer uncertainty, rising inflation, and subsequent job cuts. These factors will restrict consumer demand, which in turn will strain the supply chain and negatively impact the chemical industry, with Germany and Europe expected to be particularly hard hit.
Addressing national resilience, the Covestro chief-who also serves as president of the German chemical industry association (VCI)-called for certain vital value chains to be maintained as strategic reserves within Germany. These categories include pharmaceuticals, antibiotics, agricultural products, water purification systems, and basic chemicals, despite the fact that he acknowledged this level of domestic maintenance may be economically indefensible.
Nevertheless, he stressed that companies are facing intense pressure concerning cost reduction. “Consolidation costs money, maintaining inefficient chains costs money, and transformation costs money. Simply doing this does not automatically increase output” he stated. He concluded by warning that while international competitors faced this economic pressure differently, it necessitates that Germany and European companies must focus rigorously on maintaining highly innovative products within their domestic borders.