Iran war disrupts Asia supply chains, sends prices soaring

Tehran [Iran], March 27: From crisps to noodles, toys and cosmetics, companies - and consumersacross Asia are bracing for a crisis as the Iran war wreaks havoc on supply chains, plastics and oil supplies, upending everyday life and sending prices soaring.
For many, it is already crunch time. Choi Gun-soo, the manager of a 57-year-old South Korean factory that makes plastic films used by farmers to cover crops as well as by television manufacturers, said his suppliers were raising prices of some raw materials as much as 50 percent, while other suppliers had simply run out of stock.
"Since we're out of raw materials for some products, we'll have to gradually shut down the machines, and the next one to two weeks is likely to be very critical," he said.
While they had weathered past oil shocks as well as the COVID-19 pandemic, the impact from the war was unprecedented, Choi said, adding that the company had cut production to only 20 percent to 30 percent of usual output. "This is the first time we've been hit this hard. We're really shaken." At the heart of the supply chain disruption is the Strait of Hormuz, a narrow stretch of water off Iran's southern coast through which roughly one fifth of the world's oil and liquefied natural gas normally passes. Asia, which relies more heavily on crude oil, gas, fuel and fertilizer from the Middle East than other parts of the world, is the most vulnerable to supply disruption. The most acute shortages right now are in oil derivatives such as naphtha, sourced predominantly from the Gulf and used in refineries across Asia to make the plastics and other petrochemicals that go into almost every manufactured product.
Already prices for some of the fundamentals of modern life such as plastic and rubber are hitting records. South Korea's Samyang Foods, the maker of the popular spicy Buldak instant ramen noodles, said a prolonged conflict could lead to a shortage of packaging materials and increase costs.
Ramen noodles are typically sold in packages, cups or bowls, making them heavily reliant on polyethylene terephthalate (PET), one of the world's most widely used plastics, and also key in packaging for other products from foods to personal care.
Rival South Korean ramen producer Nongshim said it had two to three months of inventory of packaging material and was preparing for the possibility that the war, which began with US-Zionist entity strikes on Iran on February 28, could continue.
Yonwoo, a container maker for L'Oreal and K-beauty firms including Amorepacific, told Reuters it was scrambling to secure stocks of plastic resin to manufacture the pots used for skincare and cosmetics. It said there was little visibility on the material beyond June.
"The issue isn't the price - if supply itself isn't available, then without containers, you simply can't sell the product," a company official told Reuters, declining to be named as he was not authorized to speak to the media. "We are stockpiling supplies, but beyond that, we don't really have any substantial measures in place; we're simply hoping that the situation would be resolved by May."
The war has triggered fuel shortages around the globe and businesses from airlines to supermarkets and used car dealers are grappling with challenges including rising costs, weakening demand and disrupted supply chains. In Japan, department store operator Takashimaya said if the crisis persisted there was a possibility that price increases and supply concerns could spread to clothing and household appliances. Underscoring the scale of the impact, fans of Japan's Wasabeef crisps panicked this month after manufacturer Yamayoshi Seika halted production, blaming a shortage of the heavy oil used for the boilers that heat the oil to fry the snacks.
Rising costs China produces close to half the world's synthetic rubber and shortages of the naphtha needed to make it are flowing down the supply chain, forcing makers of goods such as tyres and gloves to consider raising prices or shift to natural rubber.
Source: Qatar Tribune