Mideast War, Oil Spike Squeeze South Korea Pharma-Bio Supply Chains and Shipping Costs

South Korea’s pharmaceutical and biotech industry is facing a double hit from soaring oil prices tied to a prolonged Middle East war: disruptions in raw-material supplies and higher logistics costs. Major drugmakers are expanding inventories and seeking alternative suppliers amid concerns over shortages of key inputs such as naphtha, while the government is stepping up supply-chain monitoring and exploring joint measures with the industry.

Industry officials said Sunday that the Middle East crisis, fueled by the war involving the United States and Israel and Iran, has heightened fears of instability in crude supplies from the region. International oil prices have topped $100 a barrel, setting new record highs. The combination of surging input prices and supply uncertainty is rippling through the sector.

With domestic refiners heavily dependent on Middle Eastern crude, supply chains have come under strain and naphtha prices have jumped more than 20% this month. Naphtha is a core material used to make pharmaceutical packaging containers and IV fluid bags, raising concerns across the industry.

Suppliers of basic IV solutions, including JW Jungoe Pharm and HK inno.N, are moving urgently to prepare for possible shortages of IV bags. The companies held an emergency meeting with the Ministry of Food and Drug Safety to discuss bringing in alternative materials and freezing inventories, according to industry officials. “If the situation drags on, hospitals could face supply disruptions due to a shortage of IV bags,” a pharmaceutical company official said.

Major drugmakers have also taken preemptive steps to secure materials. Yuhan Corp. has stockpiled two to three months’ worth of pharmaceutical packaging materials, and Dong-A Pharmaceutical and Korea United Pharmaceutical have increased inventories through early orders.

Rising logistics costs are another pressure point. With oil prices surging, sea and air freight rates have climbed 15% to 20%, pushing up the cost of importing raw materials. Smaller drugmakers said the added burden is difficult to absorb given already thin margins.

The food and drug safety ministry is frequently checking the supply of pharmaceutical packaging containers. It is also reviewing regulatory support, including faster approval procedures when changes in packaging materials are needed.

A pharmaceutical company official said the business environment is deteriorating rapidly as global instability drives up oil prices, exchange rates and freight costs while worsening uncertainty over raw-material supplies. The official warned that disruptions could lead to imbalances in supplies of essential medicines such as cold remedies and antibiotics, posing a potential threat to health security.

Some in the industry said the turmoil should be used to reshape supply chains. A biotech industry executive noted that most domestic companies import active pharmaceutical ingredients, making broader drug production vulnerable if supply chains falter. The executive called for government incentives to raise self-sufficiency in active ingredients.