"Can't do the laundry?" Global alarm... Which Korean company is quietly smiling? [Weekend Money]

The Middle East accounts for 20% of global production
Supply disruptions persist as the conflict deepens
"ISU Chemical is the leading potential beneficiary"

Supply disruptions of linear alkylbenzene (LAB), a raw material used in laundry detergents, have continued as the war in the Middle East drags on. With buyers seeking alternative sources, analysts say domestic producer ISU Chemical stands to benefit the most.

As buyers of LAB have recently begun negotiations for annual contracts for 2027, some are shifting volumes sourced from the Middle East to other suppliers. Although the Middle East accounts for 20% of global LAB production capacity, the deepening supply disruptions caused by the prolonged conflict have prompted buyers, particularly in South Asia, to broaden their sourcing to China and East Asia.

Isu Chemical, the only domestic producer, is expected to benefit as the prolonged war in the Middle East disrupts supplies of laundry detergent ingredients. Getty Images

"ISU Chemical is one of the biggest potential beneficiaries of this shift," said Lee Dong-wook, a researcher at IBK Investment & Securities. "As the only LAB producer in Korea, it has an integrated production system spanning normal paraffin (NP) to LAB, making it one of the few proven Asian suppliers capable of filling the gap left by the Middle East."

According to Lee, most producers in Northeast and Southeast Asia do not have the capacity to take on additional volumes. Some facilities in Asia have also reduced operating rates because of disruptions to fuel supplies from the Middle East. "Unless an external factor brings an end to the conflict in the Middle East, the tight LAB supply-demand balance will continue at least through the first half of 2027. During that period, market leadership will belong to established Asian producers capable of maintaining stable operations," he said.

Lee also said these trends point to improving results for ISU Chemical. "With new volumes from China not expected to enter the market until the second half of the year, the 2027 contract season is a rare opportunity for ISU Chemical to secure both higher volumes and a price premium," he said. "Most importantly, the shift in sourcing by South Asian buyers involves reallocating annual contract volumes, not one-off spot demand, which will further improve earnings visibility."

"Almost all LAB is used as a raw material for the surfactant LAS, making it an essential intermediate with little risk of demand shifting away," he added. "Until supply constraints ease, LAB spreads will remain a key driver of improved results for ISU Chemical."

Daishin Securities expects ISU Chemical to post revenue of KRW 2.7 trillion and operating profit of KRW 196.1 billion this year. The projected operating profit would represent a turnaround to profitability, compared with KRW 6.9 billion last year. "The spread between LAB, its main product, and NP has averaged $981 per ton from March to September this year, remaining at about 2.5 times the average for the 12 months before the war. The spread is not expected to narrow in the short term unless the conflict ends," said Park Jang-wook, a researcher at Daishin Securities.

This content was produced with the assistance of AI translation services.