Concerns over naphta procurement, triggered by escalating tensions in the Middle East, are spreading beyond Japan's industrial sectors into the political arena. While the Japanese government asserts that "overall supplies are sufficient" to mitigate these concerns, industries are preparing for potential disruptions and price increases in packaging materials, printing inks, paints, and housing equipment.
On May 20, a parliamentary debate took place where Prime Minister Sanae Takaiichi clashed with opposition leaders. The worsening situation in the Middle East and the issue of naphta supply emerged as key topics, elevating raw material supply challenges from an industrial issue to a political one.
Asahi Shimbun reported on May 21 that during the debate, Takaiichi acknowledged, "There are bottlenecks occurring in various locations regarding naphta supply," adding that "naphta, which should be sufficient, is not being properly supplied to the field." While maintaining that the total amount of naphta is not lacking, she indicated that issues are arising in the distribution process. Opposition members cited material procurement difficulties and soaring prices, calling for support for supply-side companies, to which Takaiichi responded that she would address these issues.
Naphta, a petrochemical raw material extracted from crude oil, is used as a fundamental component in various industrial products, including plastics, synthetic resins, printing inks, paints, and packaging materials. Japan heavily relies on the Middle East for its crude oil and naphta supply, and the prolonged blockade of the Strait of Hormuz has increased burdens across industrial sectors.
A notable example illustrating the disconnect between government and industry perceptions is the packaging change by food giant Calbee. On May 12, Calbee announced it would switch the packaging of 14 key products, including potato chips, to black and white due to instability in securing printing inks derived from naphta. According to Asahi, a senior official from the Prime Minister's office expressed strong displeasure at Calbee's response, suggesting it exaggerated supply concerns for media attention, while dismissing the possibility of ink shortages.
Following Calbee's announcement, the government quickly contacted the company to clarify that the overall supply of naphta was adequate. Officials close to the Prime Minister viewed Calbee's actions as an overreaction, fearing that such reports could spread anxiety to other companies. However, Calbee has maintained its decision to switch to black and white packaging, stating it is a measure to ensure stable product supply.
The government's sensitive reaction stems from concerns that raw material shortages could dampen consumer spending and business activities. With high approval ratings serving as a driving force for Takaiichi's administration, there is apprehension that supply issues could lead to inflationary pressures and dissatisfaction with the government.
In April, TOTO, a major housing equipment company in Japan, temporarily halted new orders for unit baths due to concerns over procuring naphta-derived solvents, prompting the Ministry of Economy, Trade and Industry to swiftly assess the supply situation and adjust supply chains. TOTO has since gradually resumed new orders. However, similar procurement issues have arisen, leading to discussions within the government about the limitations of responding reactively to each individual problem as they arise, Asahi reported.
The government's assertion that "naphta is sufficient" is based on total volume calculations. According to Asahi, Japan's typical monthly naphta supply is approximately 2.8 million kiloliters, comprising about 1.2 million kiloliters from imports from the Middle East, 1.1 million kiloliters from domestic refining, and 450,000 kiloliters from non-Middle Eastern imports. With the blockade of the Strait of Hormuz drastically reducing imports from the Middle East, the Japanese government plans to utilize its oil reserves to maintain domestic production and increase procurement from regions outside the Middle East, such as the United States and Peru, to fill the shortfall. Additionally, the government claims to have secured 1.8 months' worth of supply based on the conversion of intermediate products held by the private sector into naphta equivalents.
The issue lies in the potential discrepancy between the government's "total" figures and the "item-specific quantities" needed by companies. Intermediate products are often tailored for specific uses and are not easily interchangeable, meaning that even if the overall supply is adequate, shortages can occur for specific products. Matsuo Ko, head of the Energy Economics and Social Research Institute, pointed out to Asahi that "there is a risk of shortages for certain products." The gap between the government's reported naphta inventory and the actual usable inventory in the field is contributing to the confusion.
In addition to quantity, price is also a concern. While the government maintains that there is "sufficient" supply based on overall figures, the process of sourcing alternatives from outside the Middle East can lead to increased raw material costs and transportation expenses, ultimately raising the burden on companies. Reports indicate that some companies in the printing ink sector have already raised prices by more than 30%. Price increases are also being observed in consumer goods that use naphta-derived materials for packaging, such as paper diapers and natto.
Asahi noted that while the Japanese government continues to repeat the message that "overall supplies are sufficient" to prevent social unrest, companies are proactively preparing for potential procurement disruptions and price hikes. The supply chain concerns originating from the Middle East are extending beyond energy prices, affecting the broader economy, including consumer goods and housing equipment, putting Takaiichi's administration's crisis management capabilities to the test.
* This article has been translated by AI.
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