Japan's food and beverage industry is taking a hit as the war in Iran disrupts supplies of naphtha, the raw material for food packaging containers.
According to Nikkei Asia on the 28th (local time), a survey by the Japan Consumer Goods Industries Federation (Seidanren) found that more than 40% of local corporations have already been affected by a naphtha shortage or expect to be affected in the short term.
According to the Seidanren survey, 44% of responding corporations said "the impact has already occurred," while 31% worried they "will be affected within three months." Seidanren counts 712 corporations and organizations as members, including food and beverage manufacturers and restaurant operators.
The naphtha supply crunch has arisen because the Strait of Hormuz has been effectively blockaded by the war in Iran. Naphtha is an intermediate material produced when refining oil and is essential for producing plastic for food packaging and containers. With the Strait of Hormuz blocked, Japan's naphtha imports have fallen, intensifying supply instability.
As Japan's naphtha imports plunged, 25% of responding corporations expected either a "serious impact on business continuity" or a "major impact on performance and operations," according to the Seidanren survey.
Production disruptions are already becoming a reality on the ground. A mid-sized food company said, "Even whether pudding containers can be supplied in early May is uncertain," adding, "If deliveries stop, we will have no choice but to suspend sales." The ready-to-eat food industry is also being hit hard. One company received a 40% price hike request from a container supplier, prompting complaints that it was raising prices by riding on the war.
Packaging printing is also a problem. With naphtha-based materials in short supply, cases have emerged where product names and ingredient labels cannot be printed directly on packaging. Some beverage companies plan to halt container printing for 15 products from late May. Given the nature of mass production, attaching labels is also reportedly impractical.
Materials and supplies prices are also rising rapidly. Mitsubishi Chemical raised prices of food packaging film by more than 20%, and ink manufacturers such as DIC and Artience raised prices by up to over 30%.
An executive at a chemical company operating ethylene production facilities said, "The procurement price of naphtha is about twice the usual level," adding, "Some degree of passing on costs is inevitable." Regarding concerns from food manufacturers, the executive said, "Given the risk of weakening demand, we do not intend to implement opportunistic price increases."
The problem is that there is currently no substitute for naphtha. In the Seidanren survey, 77% of responding corporations rely on naphtha-based materials. Nikkei Asia noted that "given an industrial structure centered on mid-sized companies, a quick response is difficult," and expressed concern that "after May in Japan, sales suspensions or 'no-print packaging' could spread across the food industry."