Weaponising Chemical Supply Chains - A New Global Power Battle

Global supply chains have become the new arena of geopolitical competition. Countries like the US, Russia, and China are exploiting their control over trade dependencies, export controls, and natural resources to tip the balance of world power in their favour. During COVID, China, which produces nearly half of the world’s antibiotics by value, showed its dominance by leveraging foreign medicine supplies in response to a trade war that Donald Trump initiated in January 2018.

In recent years, many countries have been stockpiling key materials, restricting exports of critical chemicals, and reconfiguring trade partnerships to secure an ample stock and strengthen their supply chain. In this blog, we will explore how countries like China, the United States, European Union members, India, and Russia are entangled in this chemical supply struggle. We will also talk about their dominance and contribution to the global chemical industry and the changing balance of power that we might see in the next decade.

Major Chemical Producers and Key Strengths

The global chemical industry is estimated to be worth over $6.1 trillion, growing at a CAGR of 2.3%. Despite such a big market, only a few countries control most of it. China stands at the top, accounting for about 43–44% of global chemical output in recent years. While its focus has historically been on high-volume and low-margin basic industrial chemicals and fertilizers, it has been rapidly expanding into specialty and fine chemicals.

China is followed by the United States, which contributes ~11% to the overall global chemical industry. The US has predominantly focused on pharmaceutical innovation and biotech, with most of the generic drug manufacturing being offshored to other countries like India and China. They also have particular strength in petrochemicals, polymers (benefiting from shale gas feedstock), and specialty chemicals.

Then we have the European Union, which specializes in high-quality specialty and fine chemicals, pharmaceuticals, and advanced materials, and accounts for ~13% of global sales. Similar to the US, their strength has been drug R&D and production in countries like Germany and Ireland. However, for base chemical production European Uninon has faced challenges from high energy costs and competition from Asia.

While these three countries collectively control over 70% of the chemical industry, some emerging players exist. India is one of them, with a ~3% global share but a huge dominance in the pharmaceutical and agrochemical sectors. It is also the world’s leading manufacturer of generic medicines and a major exporter of finished drugs. India has huge formulation capacity and some API production, supplying ~20% of global generic drug exports.

However, India itself depends on China for many drug ingredients, with about 70% of India’s API requirements coming from them, creating a critical dependency​. This landscape shows that China’s sheer scale gives it unmatched influence across chemical supply chains. 

The U.S. and EU maintain strengths in higher-value segments but depend on imports for some raw materials. Emerging economies like India have niche strengths yet remain tied to China-centric supply networks for inputs. Russia (with Belarus) is a linchpin in fertilizer markets and energy-related chemicals. These interdependencies set the stage for leverage and vulnerability in the global supply chain.

Dependencies and Vulnerabilities in Global Chemical Supply Chains 

Decades of globalization have created many intricate chemical supply chain networks with multiple dependencies. However, this interdependence has also created choke points where one nation controls a critical input. Such dependencies can be exploited in conflict or diplomatic disputes, turning economic reliance into political vulnerability​. Let’s look at the current state of different chemical industries and which countries hold an upper hand in them.

1. Pharmaceutical APIs Concentration

The US and EU are already critically dependent on China and India for a large share of generic medicines and APIs. On top of that, India is dependent on China for about 70% of its API from imports. It indicates the amount of control that China has on the supply of Pharma APIs, and they have exercised this power in the past.

In early 2020, China’s lockdowns and export slowdowns caused shortages of certain antibiotics and medicines in the West. In fact, a Chinese state-run outlet explicitly threatened in March 2020 that China could cut off pharmaceutical exports to the U.S., highlighting America’s “dangerous reliance” on Chinese drug supplies​.

2. Fertilizer and Food Security Dependencies

Modern agriculture depends on a steady flow of fertilizers (nitrogen, phosphate, potassium). Many countries do not produce enough domestically and rely on a handful of exporters. Before the Ukraine war, Russia and Belarus. China is another pivotal player, responsible for ~12% of global fertilizer exports.

Countries like Brazil import over 80% of their fertilizer, much of it from Russia, Belarus, and Canada. When these supplies are disrupted, food production is threatened worldwide. For instance, in 2021, China imposed a ban on phosphate fertilizer exports to safeguard its own supply​. This removed a major chunk of global supply overnight, forcing import-dependent nations to scramble for alternatives.

Similarly, after Russia’s invasion of Ukraine in 2022, Russian officials suspended fertilizer exports and threatened to cut off Western importers in retaliation for sanctions​.

3. Petrochemicals & Energy Feedstocks

Countries that lack domestic petroleum reserves are highly dependent on imports, making them vulnerable to supply chain chokepoints. For example, Europe’s heavy reliance on Russian natural gas was a glaring vulnerability – when geopolitical tensions spiked in 2021–2022, Moscow’s reduction of gas flows (a classic case of energy supply weaponization) crippled European ammonia and chemical production.

Another dependency is in Liquefied Natural Gas (LNG) and NGLs for petrochemicals. Asia imports large volumes from the Middle East and the US, and any disruption can cascade into chemical feedstock shortages.

4. Specialty Chemical Choke Points

Several high-tech industries depend on niche chemicals produced by only one or a few countries. For instance, before COVID, Japanese companies controlled about 90% of the world’s supply of fluorinated polyimide and photoresist, and 70% of high-purity hydrogen fluoride – all essential for making chips and displays​.

South Korea’s semiconductor industry was 100% reliant on imports for some of these materials​. This monopoly became a vulnerability when Japan tightened export controls on these chemicals to Korea in 2019.

Another example of this is China’s near-monopoly in rare earth elements and related refined products. They produce over 80% of rare earth oxides and the vast majority of processed rare earth magnets and alloys. These are not traditional “chemicals,” but their refining is a chemical-intensive process, and they are critical for electronics, EVs, and defense. In 2024, China banned the export of Gallium and Germanium​ to the United States as a response to USA's plan to curb exports of advanced chips to China that could be used in applications that threaten America’s security..

Policy Actions and Strategic Responses to Supply Chain Disruptions

Faced with the prospect of a Chemical Cold War, governments and industries worldwide are implementing measures to strengthen their position and mitigate vulnerabilities. These responses include strategic stockpiling, investment in domestic production, “decoupling” or de-risking of supply chains, and new international cooperation. Let’s examine these.

1. Strategic Stockpiling of Critical Chemicals

Reuters reported that China has announced that it will be accelerating the annual stockpiling of strategic fuels, food, and other commodities. Considering the recently imposed tariffs and the trade war with the US, China stockpiling strategic commodities can give them a siginifcant advantage. This will reduce their dependency on other countries, and any supply chain disruption will not have a major effect on their economy.

Similarly, Western countries are following suit in select areas. The US maintains a strategic national stockpile of medical supplies and has plans to add key pharmaceuticals and APIs to it​. These stockpiles act as insurance and can help countries operate normally in case of any major supply chain disruptions.

2. Diversification of Supply Chains

Being dependent on a single partner for chemicals can pose problems in case of new policies or conflicts. That’s why many countries are exploring the China+1 strategy, considering their major influence over the chemical industry. 

The US is teaming with allies like Canada, Australia, and European partners to develop alternative sources for critical minerals and chemicals, while Europe has sought new fertilizer import partners like Canada and Saudi Arabia. India has also diversified its fertilizer suppliers by turning to countries like Israel, Jordan, and Canada by signing long-term contracts.

3. Export Controls and Defensive Measures

Exports are crucial, but countries must also ensure that they don’t end up over-exporting critical chemicals that they produce. This is to ensure that in times of need and supply chain constraints, countries have enough for their own economy. 

For example, China has strict controls over its gallium/germanium exports to the US amidst growing tensions between the two countries on trade. Additionally, they restricted fertilizer exports to keep domestic prices low. Similarly, India has put export restrictions on certain food commodities and medicines during shortages. Such measures indicate that exporting countries will not hesitate to curb shipments of vital chemicals if domestic or strategic interests demand it.

4. Boosting Domestic Production and Onshoring

Reducing dependency often means making more at home. Governments are offering incentives, subsidies, and regulatory support to develop domestic capacity in vulnerable supply chains. In the US, funds from the CARES Act and infrastructure bills are being allocated to build factories for the production of critical APIs and essential generic medicines (most of which were historically outsourced to China and India).

Similarly, India has been curbing its dependency on China for APIs. It has rolled out a Production-Linked Incentive (PLI) scheme for bulk drugs and chemical intermediates, offering financial incentives to firms that manufacture 53 critical APIs domestically. This policy was launched in 2020 and has led to new plants for antibiotics, fever reducers, and vitamin chemicals in India.

Final Thoughts

Global chemical supply chains feature many single points of failure: one country or a small bloc dominating the supply of a crucial input. Whether it’s Chinese API factories, Russian potash mines, Gulf oil, or Japanese electronic chemicals, these concentrations create vulnerabilities. In stable times, they provided efficiency and lower costs, but in an era of geopolitical rivalry, they have become potential “hostages” states can hold. So, countries need to try to be self-reliant and diversify their supply chain to prevent any major blockage due to geopolitical rivalry.

As chemical supply chains become tools of geopolitical power, resilience is no longer optional; it’s a competitive edge. Scimplify helps global businesses de-risk sourcing, diversify partners beyond high-risk geographies, and gain complete visibility across critical categories like APIs, fertilizers, and specialty chemicals.