TOKYO, Apr 05 (News On Japan) - As the Iran conflict shows signs of prolonged escalation, Japan’s heavy reliance on Middle Eastern oil is driving a sharp surge in naphtha prices—an essential raw material for plastics—forcing manufacturers to implement unprecedented price hikes of over 30% while raising concerns that widespread cost increases and potential shortages across food packaging, medical supplies, and daily goods could intensify from May onward if supply disruptions persist.
At corporate entrance ceremonies marking the start of the fiscal year in April, newly hired employees were welcomed with creative presentations, including AI-generated projections of their future careers, while executives simultaneously warned of increasing geopolitical risks tied to escalating tensions in the Middle East.
Leaders at major trading companies, which also handle crude oil imports, expressed concern that the situation would not be resolved quickly, noting that forcing vessels through unstable regions is not a viable option and that prolonged instability is likely.
Airlines also highlighted rising risks, as uncertainty surrounding U.S. military actions toward Iran continues to weigh on global conditions.
Japan is already in the midst of rising prices, with more than 2,700 food items increasing in cost this month alone, averaging a 14% hike, and notably, these figures do not yet reflect the impact of the Iran situation. Teikoku Databank warns that if disruptions such as a potential closure of the Strait of Hormuz persist, a renewed wave of price hikes could begin as early as July.
A tanker carrying naphtha arrived in Tokyo Bay on Wednesday, underscoring the growing importance of the petroleum-derived material, which is used as a key raw ingredient in a wide range of plastic products. Any disruption in its supply chain is expected to drive up costs across numerous industries, including healthcare, agriculture, and logistics.
In response, the government has established a task force to secure stable supplies of naphtha and related products. However, at manufacturing sites, the impact is already being felt.
At a company producing food storage bags using polyethylene derived from naphtha, supply chain disruptions have forced a shift to longer shipping routes, doubling delivery times from around 20 days to as much as 45 days, significantly increasing costs.
With polyethylene prices already doubling, the company has decided to implement what it describes as the largest price increase in its history, exceeding 30%, as it prioritizes maintaining stable supply amid strong customer demand.
The ripple effects are spreading further. A manufacturer of food containers, which uses polystyrene made from naphtha, reported receiving notice of a roughly 30% increase in raw material costs from suppliers, with no room for negotiation.
The company stated that such a scale of increase is unprecedented and that it will be forced to raise prices starting next month, as material costs account for a large portion of production expenses, making continued operations unprofitable without adjustments.
Naphtha, a colorless liquid produced during the oil refining process, serves as a fundamental raw material for products such as plastics, vinyl, food wrap, and liquid detergents. Derived as a byproduct of gasoline production, it accounts for roughly 10% of refined crude oil output.
Once produced, naphtha is processed into basic petrochemicals such as ethylene, which is then transformed into materials like polyethylene and polystyrene, used in items ranging from plastic bags to foam containers and food trays.
Japan has historically refined about 40% of its naphtha domestically, but more than 90% of the crude oil used for production is sourced from the Middle East, while over two-thirds of imported naphtha also originates from the region, resulting in an effective dependency of around 80%.
South Korea, previously accounting for about half of Japan’s non-Middle Eastern imports, has halted naphtha exports in response to the current situation, further tightening supply.
The Ministry of Economy, Trade and Industry expects imports from countries such as the United States and Peru to expand in April, potentially doubling procurement from non-Middle Eastern sources.
Japan also relies heavily on imports of processed petrochemical products. PET resin used in plastic bottles is largely sourced from countries like Thailand, while synthetic rubber gloves used in medical and household settings depend heavily on imports from Malaysia.
The government maintains that there is no immediate concern, citing stockpiles equivalent to roughly two months of supply, including reserves held by private companies for products such as polyethylene.
However, domestic naphtha prices are expected to surge to nearly double normal levels.
Petrochemical consultant Hiroki Yanagimoto warns that while immediate shortages are unlikely, if disruptions such as a prolonged closure of the Strait of Hormuz continue beyond May, global competition for naphtha will intensify sharply.
Even if minimum supply levels can be secured, prices of petrochemical products are expected to rise between 30% and double, potentially leading to shortages in food containers, medical supplies, automotive and electronics components, and agricultural fertilizers, raising concerns about widespread impacts on daily life.
