From the Physical Supply Chain to the Economic Structure of the Value Chain

Among the chemical products most exposed to the consequences of a closure of the Strait of Hormuz is cyclohexane, one of the key intermediates in the benzene-nylon value chain: the complex network that links benzene to the production of the main industrial polyamides.
The importance of this issue stems from the growing role that Saudi Arabia has played in the international trade of this product in recent years. The reduction in flows originating from Saudi Arabia has created significant tensions in the cyclohexane market, fueling expectations of substantial price increases.

When the value chain is viewed from a purely technological perspective, the conclusion appears almost inevitable. Since cyclohexane is an essential step in the conversion of benzene into polyamides, a sharp increase in its price should progressively be transmitted to downstream intermediates and final products. From this perspective, price transmission seems to be a direct consequence of the sequence of industrial processes.

However, data on international trade and commodity prices suggest that reality may be more complex.

International Trade in the Benzene-Nylon Value Chain

The table below presents international trade data for the commodities that make up the benzene-nylon value chain over the last twenty-five years. The chain starts with benzene, the primary feedstock, and continues with cyclohexane, the main intermediate in the production process. Cyclohexanone is produced from cyclohexane and, through subsequent processing stages, the chain branches into two distinct production routes: caprolactam, from which Nylon 6 is produced, and adipic acid, the precursor of Nylon 6.6.

The most striking finding emerging from the table is the strong divergence between the evolution of benzene trade and that of some of the key intermediates within the value chain.
While international benzene trade nearly doubled between 2000 and 2025, global cyclohexane trade experienced a particularly sharp contraction, falling from more than 1.3 million tonnes to just over 300 thousand tonnes. A significant decline can also be observed in caprolactam trade, whereas cyclohexanone and adipic acid display broadly stable trends. Over the same period, international trade in polyamides remained at high levels, well above those recorded at the beginning of the 2000s.

Taken together, these data suggest that the increasing internationalization of the value chain has not translated into growing trade volumes for all of its intermediates. On the contrary, the sharp decline in the trade of certain products, particularly cyclohexane, indicates that an increasing share of production processes may be taking place within integrated industrial structures, reducing the need to turn to the market to purchase the intermediate goods required at the various stages of the value chain.
Although these data do not directly prove this hypothesis, the observed trade patterns are difficult to reconcile with a representation of the value chain as a simple sequence of independent operators buying and selling each intermediate product on the market. Instead, they appear to reflect a gradual process of industrial reorganization towards greater vertical integration.

If this interpretation is correct, then the economic structure of the value chain may differ significantly from its physical structure. In particular, the presence of operators integrated across multiple stages of the production process tends to reduce the number of market transactions and, consequently, the importance of intermediate-product prices as a mechanism for transmitting shocks along the value chain.

International Price Changes Along the Benzene-Nylon Value Chain

The evolution of prices along the value chain also provides interesting insights. Despite the significant tensions affecting the cyclohexane market, the prices of downstream intermediates and final products appear to follow trends that are more closely aligned with benzene prices than with those of cyclohexane itself.

The table reports the price changes recorded in 2026 for the main commodities in the benzene-nylon value chain, based on different information sources: international quotations observed in the European Union, Chinese, and Japanese markets, as well as price assessments published by the Industrial Chemical Products Price Commission of the Milan Chamber of Commerce.

A first noteworthy finding concerns benzene, whose price increased by very similar percentages across the different geographic areas, ranging between 20% and 25%. This pattern is consistent with the price increases expected for petroleum-derived products following the rise in crude oil prices.
The behavior of downstream products appears more nuanced. According to international market quotations, price increases for benzene derivatives generally range between 5% and 20%, without showing any systematic amplification of the shock along the value chain. In several cases, the growth rates observed for cyclohexanone, caprolactam, adipic acid, and polyamides are even lower than those recorded for benzene.

A different signal emerges from the Milan Chamber of Commerce price assessments. In this case, price increases for the main cyclohexane derivatives are significantly higher than those observed for benzene and display a pattern that is more consistent with the possibility that the shock in the cyclohexane market will gradually spread to the downstream stages of the supply chain.

These two sets of evidence do not allow us to determine which model best describes the functioning of the value chain. They do, however, suggest that different information sources may capture different aspects of the price formation process. While international quotations appear to reflect the market equilibria effectively reached by buyers and sellers, the Chamber of Commerce assessments seem to be more closely aligned with market participants' expectations regarding the transmission of cost increases along the value chain.
Rather than providing a definitive answer, the comparison between the different sources highlights the complexity of price formation mechanisms and the need to interpret each indicator in light of the specific economic phenomenon it is intended to represent.

Conclusions

The evidence presented in this article does not allow definitive conclusions to be drawn regarding the industrial structure of the benzene-nylon value chain. However, it raises an important question: is it correct to interpret the transmission of price increases solely through the physical sequence of production processes?

The hypothesis advanced here is that, in some cases, representing a value chain as a simple sequence of products may be insufficient to understand price formation mechanisms. Alongside the physical value chain, there is also an economic structure of the value chain, shaped by the way firms source raw materials, organize production processes, and manage relationships between the different stages of the value chain.

In the case of the benzene-nylon value chain, the combined analysis of trade flows and price dynamics suggests that this economic structure may play an important role in determining how a shock affecting the market of a specific intermediate is actually transmitted — or attenuated — throughout the rest of the value chain.
The sharp contraction in international cyclohexane trade observed over the last twenty-five years is consistent with the hypothesis of increasing vertical integration across the different production stages. In such a context, the reduction in market transactions involving intermediates may limit the ability of a localized shock to propagate automatically throughout the entire value chain.

At the same time, the prices reported by the Milan Chamber of Commerce appear more consistent with a model in which the shock is transmitted directly through the successive stages of the value chain. This divergence does not allow definitive conclusions to be reached, but it suggests that different information sources may capture different aspects of the price formation process: on the one hand, the expectations and assessments expressed by market participants; on the other, the adjustments that emerge from actual market dynamics and trade flows.

Rather than providing a conclusive answer, the evidence analyzed here invites us to move beyond a purely technological interpretation of the value chain. Understanding how a shock propagates along a value chain requires considering not only the physical links between products, but also the economic organization connecting the various participants.
From this perspective, a value chain should not be viewed merely as a sequence of production processes, but as a complex economic system in which industrial structure, vertical integration, commercial relationships, and market mechanisms jointly contribute to price formation.