As naphtha prices rise due to the prolonged conflict between the United States and Iran, concerns are growing among small business owners in Korea about instability in the supply of packaging materials. Small business owners pointed to the possibility of expanded expense burdens and supply disruptions and urged the government to come up with countermeasures.
Korea Federation of Micro Enterprise (KFME) said in a statement on the 30th that "the price of naphtha, which was about $640 per metric ton (MT) before the war, has recently surged to $1,220, nearly doubling and threatening the right to survive for small business owners."
Naphtha is a basic petrochemical feedstock produced in the process of refining crude oil. Naphtha is cracked to make basic chemicals such as ethylene and propylene, which are then used to produce various packaging materials such as vinyl, containers, and packaging film. When naphtha prices rise, the structure is such that both the manufacturing expense for packaging materials and the supply price rise together.
The federation noted that "the rise in naphtha prices, a key raw material for plastic containers and vinyl, has led to a surge of more than 40% in packaging material prices," adding that "small business owners in the food service and retail sectors, where delivery accounts for a high share, have been pushed into a 'dilemma' of management crisis."
It went on to say, "There needs to be a government-level crackdown on market-disrupting behavior and institutional measures," urging authorities to "designate packaging materials as 'daily necessities' to manage the rate of price increases, and sternly crack down on unfair transactional practices such as hoarding and cornering the market by some distributors taking advantage of rising prices."
It also said, "Fiscal support is needed to ease small business owners' expense burdens," and requested that authorities "create a 'small business packaging expense relief grant' linked to naphtha prices, add packaging purchase costs to the items covered by the small business management voucher currently in place, and expand the related budget through an extra budget."
Song Chi-young, head of the Korea Federation of Micro Enterprise (KFME), said, "For small business owners already at their limits, the surge in packaging prices adds yet another worry," adding, "We ask the government and platform industry to take this situation seriously and make every effort to help small business owners overcome the crisis."