Markus Steilemann, the CEO of the chemical conglomerate Covestro, anticipates that the ongoing crisis in Iran will lead to greater scarcity of certain raw materials. While he notes that the situation is not yet at its worst and that transport links-such as pipelines to the Red Sea and land routes-remain in operation for some extent, he warns that any significant disruption to these pathways would further escalate the supply instability.
According to Steilemann, some supply failures will only become visible in the future. He suggests that while some sectors may face severe shortages, there is a risk of complete product unavailability for specific materials in certain regions.
Interestingly, he points out that despite the shortages, companies like Covestro could actually benefit. He explains that the high prices for some chemical raw materials are not primarily driven by low demand, but rather by sheer lack of availability. The CEO noted that countries such as Japan and South Korea are currently impacted because they are struggling to obtain sufficient physical oil and gas raw materials for export, forcing them to produce goods only for domestic consumption.
Covestro is actively assessing alternative supply chains for specific products. Steilemann emphasizes the critical nature of materials that, while used in small volumes, have disproportionately large effects-he uses fire retardants as an example, noting that without them, a product cannot meet required specifications and is therefore commercially worthless.
However, he expects the most pronounced impacts to be viewed through indirect channels. These include consumer uncertainty, inflationary pressures, and escalating job cuts. He warns that this weakens consumer demand, placing significant strain on both the upstream supply industry and the chemical sector, with Germany and Europe being the most vulnerable.
Addressing this instability, the Covestro chairman called for several key value chains-including pharmaceuticals, antibiotics, agricultural products, water treatment, and basic chemicals-to be maintained as strategic reserves within Germany for resilience reasons. Despite admitting that such a effort is economically unjustified in Germany, he argues it must be pursued.
Yet, he adds a note of caution: maintaining inefficient supply chains, or even pursuing consolidation and transformation, is costly and does not automatically translate into increased output, unlike what international competitors might achieve. Therefore, he stressed the need to focus efforts and resources solely on highly innovative products that can be successfully maintained within Germany.
