APAC Commodity Issuers Likely To See Divergent Effects With Prolonged Iran Conflict - Fitch Ratings

KUALA LUMPUR, March 4 (Bernama) -- Asia-Pacific commodity issuers are likely to see divergent credit effects if the Iran conflict prolongs Gulf energy supply and shipping disruption, global credit rating agency Fitch Ratings said today.

It said in a research note that higher realised prices will benefit upstream producers while the cost inflation will pressure downstream, energy- and feedstock-intensive sectors’ margins.

Higher input prices pose the main risk for chemicals, fertilisers and some metals, while interruptions to shipping can further strain working capital via delays and goods stuck at sea, it said.

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“Our primary tail risk is an extended Strait of Hormuz shutdown, although we expect disruptions to be brief. Upstream oil and gas producers are likely to benefit first as buyers scramble for replacement cargoes,” the research note said.

Buyers who turn to producers in Australia and Indonesia — who offer immediate alternatives — will boost prices and cash flow for issuers such as Oil and Natural Gas Corporation and PT Pertamina Hulu Energi. 

By contrast, downstream refiners, including Indian oil companies such as Indian Oil Corporation, will face margin and working-capital pressure if input prices rise faster than they can pass costs through to customers. 

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Fitch Ratings said the Gulf supply disruption will also affect the metals market, with varying impacts on producers, adding that increased power and logistics costs could offset stronger prices.

The ratings agency said the Middle East accounts for eight to nine per cent of global aluminium production.

“Chinese producers are better positioned to benefit from tighter global supply and elevated prices because their power availability and tariffs are more stable. Conversely, steeper power prices in Japan and South Korea can exert pressure on margins,” Fitch Ratings said.

Copper faces mixed pressure. Supply-chain disruption supported near-term copper prices, but higher outlays to ship from South America and Africa will narrow margins, alongside rising energy prices.

High power prices could also weaken global growth, reducing copper demand and pushing prices lower. 

Implications for steel producers are mostly negative because logistics bottlenecks for ore imports and rising energy prices will result in higher unit costs, while exports to the Middle East, which comprised about 15 per cent of Chinese steel exports in 2025, could soften.

“The Gulf region also plays an important role in the global fertiliser trade. An extended conflict will have a mixed impact on fertiliser manufacturers because stronger selling prices can be offset by sharp increases in natural gas input costs,” Fitch Ratings said. 

Chemical producers face a high risk from a prolonged conflict because elevated oil and gas prices will lift naphtha feedstock costs and compress margins. This poses particular risk for issuers with weaker rating headroom. 

-- BERNAMA