Skip to main content
Marsh logo

Article

Geoeconomic confrontation: What it means for the chemical industry

Geoeconomic confrontation is raising trade and energy risks. Chemical makers must diversify supplies, build flexible plants, and plan for disruption.
Person's name and title

By Steve Horstkamp , 

Managing Director & Chemical Industry Practice Leader

03/31/2026 · 2 minute read

The World Economic Forum (WEF) Global Risks Report 2026 named "geoeconomic confrontation” as the top near-term global risk. That means countries are using trade rules, export limits, sanctions, and government policies to gain advantages or punish others. These actions can suddenly change how companies buy, make, and sell things across the world.

Why the chemical industry is especially vulnerable

  • Chemical manufacturers need a few key raw materials (like naphtha, ethane, natural gas, and ammonia) to make the intermediate materials needed by their customers. If such feedstocks become hard to get or expensive, many chemical products become harder to make.
  • Manufacturing chemicals uses a lot of energy. When energy prices jump or supply is cut off, factories may have to slow or stop production.
  • Chemicals and their ingredients have long, global supply chains. If trade is blocked or slowed, deliveries can be delayed and costs increase.

For example, after Russia’s invasion of Ukraine, gas supplies to Europe were reduced. That pushed up the price of gas and other feedstocks, causing some chemical plants in Europe to cut production or shutter operations. That reduced the supply of items such as fertilizers and pushed prices higher.

How trade rules and politics can make things worse

Export controls, sanctions, and tariffs can break normal trade routes. Companies may need to find new suppliers and/or new shipping routes, pay more for shipping and insurance, and/or accept longer delivery times. Governments also support local production of certain chemicals, which can create duplicate plants in different regions and increase overall costs.

How companies are reacting

Many chemical companies are attempting to balance the goal of low-cost production with the need to focus their ability to handle disruptions. Actions include:

  • Building plants closer to customers or to stable energy supplies (regionalizing)
  • Using more than one supplier for key inputs (dual‑sourcing)
  • Investing in recycling and alternative raw materials
  • Creating plants that can run on different feedstocks (flexible crackers)
  • Signing long‑term supply contracts for things like LNG or hydrogen

What companies can do

  • Plan for bad scenarios: Run simulations that assume trade limits, sanctions, or energy price spikes.
  • Diversify supplies: Don’t rely on a single source or country for key inputs.
  • Make operations flexible: Design plants and contracts so they can switch inputs or share risks for energy and freight costs.
  • Improve monitoring and policy engagement: Set up teams to track geopolitical risks, talk with governments, and use digital tools to spot supply problems early.

Bottom line

Geoeconomic confrontation makes the world less predictable. Chemical companies that prepare—by spreading risk, building flexibility, and engaging with policymakers—will be better able to keep producing and compete even when trade and energy conditions are unstable.

Talk to us

Contact us to get in touch with a chemical specialist, learn more about a specific solution or submit a sales inquiry.

Contact us

Related insights

Placeholder Image

Webcast

Pollution claims in focus – understanding trends, challenges, and best practices

11/18/2025
Production line of automobile plant, paint shop, conveyor. Finished product

Article

Four actions to mitigate rising product recall risks

07/25/2023
Placeholder Image

Article

5 major risks chemical companies should address now

07/14/2022
medical factory supplies storage indoor with workers people

Article

As Hurricane Season Approaches, Chemical Companies Should Consider Parametric Coverage

04/28/2021
View more