Due to the disruption in oil imports caused by the US-Iran war, a shortage of gasoline is spreading in major Asian economies such as Japan and South Korea. Japanese food packaging bags are fading, medical supplies are under pressure, and some factories in South Korea have been closed... On June 11th, Nikkei Asia noted that China has managed to stay relatively unscathed during this crisis thanks to its diversified supply system.
The acting president of the Korean Chemical Industry Association and CEO of Korea Incheon Petrochemical, Bae Jong-hoon, stated at an industry conference held in Fukuoka, Japan, that the closure of the Strait of Hormuz has turned into a major crisis, highlighting the 'structural vulnerability' of the Asian petrochemical industry.
Reports indicate that this strait accounts for approximately 20% of the world’s crude oil exports. Its closure has a particularly significant impact on the Asian region. Data from the U.S. Energy Information Administration shows that more than 80% of the crude oil transported through the Hormuz Strait goes to Asian markets.
Naphtha is an important derivative in the process of crude oil refining. It is not only a core raw material for modern manufacturing and chemical industries, but also a key upstream material in the semiconductor industry chain.
The blockage of crude oil imports has caused a supply crisis of naphtha in many Asian countries, including Japan. Before the conflict, over 90% of Japan's crude oil imports and over 70% of its naphtha imports came from the Middle East. Now, Japan has to reduce the imports of these products.
Japan Broadcasting Corporation (NHK) reported last month that the well-known Japanese snack manufacturer Carlybee has informed its business partners that due to the unstable supply of printing ink and other materials caused by the situation in the Middle East, several products of the company will be packaged in black and white.
Shared on social media: Lego black and white packaging. Social Media
It is also reported that naphtha is a basic material for producing medical gloves, syringes, catheters, infusion bags, and other medical supplies. The shortage has put pressure on the supply of medical materials in Japan. Data from the Japanese government shows that as of the end of April, nearly 5,000 medical institutions across Japan are facing shortages of medical supplies, and most of them report difficulty in obtaining medical gloves.
Meanwhile, South Korea and Vietnam have also been forced to shut down some factories that use gasoline in their production. Currently, these Asian countries are actively seeking to purchase gasoline from regions outside the Middle East in order to maintain stability in their industrial supply chains.
According to Nikkei Asia, China, which has the world’s largest chemical production capacity, is relatively less affected. Its sources of crude oil are more diversified, including not only the Middle East but also Russia and other supply channels. Moreover, Chinese chemical companies use not only naphtha but also other raw materials, such as ethane extracted from natural gas and coal. This allows China to maintain stable production of chemical products even in the event of disruptions in Middle Eastern naphtha supplies.
Japanese media sarcastically pointed out that although the price of naphtha from regions outside the Middle East has doubled compared to before the conflict and has now fallen, the overall price is still about 30% higher. If this situation continues, Chinese chemical companies, which already have a price advantage, may take a further lead in the market.
Japanese large-scale chemical enterprise executive says, "The competitiveness of the Asian petrochemical industry will further decline, including Japan."
Reports indicate that the Asian petrochemical industry has been severely impacted by the supply from China’s cheap chemical products. This has led to a decline in profitability and made the industry struggle to survive. As Baizhongxun said, the current Middle Eastern crisis is undoubtedly adding further pressure to this industry.
Facing industry challenges, many Asian countries are accelerating the pace of industrial integration. South Korea, which has a higher ethylene production capacity than Japan, is currently undergoing government-led integration of ethylene factories. Thai National Petroleum Public Company Limited and Thai Siam Cement Group announced in April that they will study the merger of their basic chemical and commercial-grade plastic businesses.
A chairman of a petrochemical industry association in Thailand, Tosapong Bunyipipat, said that even before the supply disruption occurred, the industry had already started to shift towards more streamlined capacity, improving equipment utilization rates, and focusing more on specialized and high-value-added products. However, 'now, this transformation is accelerating and has become even more urgent.'
Reports indicate that Japanese chemical companies have been continuously promoting industrial restructuring in recent years, ensuring that production capacity is matched with the declining domestic demand. Kiyosiro Kudo, president of the Japan Petroleum Chemical Industry Association and chairman of the Asahi Chemical Group, stated that given the uncertain international situation, industries still need to maintain a certain level of resilience to respond flexibly to sudden changes.
He believes that Asian economies facing common challenges should establish closer complementary cooperation mechanisms. Even strengthening exchanges with neighboring South Korea can be of great significance, as it helps to diversify supply chain risks.
In response to the supply chain risks posed by the Middle Eastern situation, the Japanese government proposed the "POWERR Asia" cooperation framework in April, aiming to establish a resource supply chain cooperation mechanism with Asian countries. In addition, Japanese Prime Minister Kei Shibusawa also tried to reassure domestic citizens and businesses by stating that although the war provoked by the United States and Israel has effectively closed the Strait of Hormuz, Japan will still be able to maintain a continuous supply of naphtha by the end of this year.
However, according to a report by the Japan Times on June 5th, industry insiders hold a different view. Mitsuo Kokubun, a visiting scholar at the Japan Energy Economics Research Institute and former president and chairman of the Japanese company Maruho Co., Ltd., sounded an alarm during a online seminar, stating that Japan could face a shortage of naphtha-derived chemical products as early as the end of this month.
He also added that finding alternative sources for Japan's 15 million barrels of crude oil imports from the Middle East before conflicts erupted would be impossible.
