As disruptions in Middle East-sourced naphtha supply spread to Korea's retail and food industries, instability in packaging material supply is becoming a reality. Even after producing finished goods, shipments may be impossible due to a shortage of packaging, fueling concerns inside and outside the industry.
According to the retail and food industries on the 23rd, major corporations are preparing contingency plans in case inventories of naphtha, a raw material for product packaging, run out. Naphtha is a basic petrochemical feedstock obtained in the crude oil refining process. Plastic resins (PE, PP, PET) processed from base fractions such as ethylene are used as packaging materials including plastic bags, containers, and trays.
This is the result of extended military tensions around the Strait of Hormuz, a key crude oil route, following U.S.-Israeli airstrikes on Iran, affecting not only crude oil but also naphtha supply. Instability in crude supply led to disruptions in plastic resin supply via naphtha, triggering a chain reaction into packaging shortages that use these as inputs, which in turn created problems at the packaging and shipment stage. A food industry official said, "Because food is distributed in packaged units, if there is no packaging, shipments are impossible even after production is complete."
◇ Retailers and food companies holding on with packaging inventories
Korea's major retailers and food companies are currently holding on with stockpiled packaging inventories. Nongshim says it has secured large volumes of materials and supplies through its packaging affiliate YoulChon Chemical, so there will be no immediate issues with product supply and shipments for the next two to three months. However, it is reviewing response measures in case the current situation drags on.
Samyang Foods is also seeing no major disruptions to production for now, but is monitoring the situation with the possibility of unit cost increases due to a shortage of raw material supplies if instability in packaging raw material supply persists. OTOKI has formed an internal task force (TF) to preemptively respond to packaging supply risks and is checking inventories for roughly 1,000 types of packaging and the status of materials and supplies procurement by partner firms.
Pulmuone is managing its packaging supply chain, including by flexibly adjusting container suppliers. Binggrae is monitoring instability in the supply of film and plastic raw materials used for key products and is considering adjusting the launch schedule of new products. Dongwon F&B is strengthening collaboration with long-term contract partners and focusing on securing inventories to prepare for growing instability in sourcing film materials and supplies for packaging.
However, some small and midsize food companies and OEM (original equipment manufacturing) firms are reportedly already at the limit. A food industry official said, "Inventories of some items, such as packaging adhesives, have dwindled to about a month," adding, "If large corporations preempt volumes, small firms could find it difficult to secure supplies at all as materials and supplies prices rise. There is now talk of (temporary) supply suspensions, showing how a sense of crisis is spreading across the industry."
The retail sector is also watching closely. A convenience store industry official said, "So far, we are responding by pre-securing volumes, but if the situation drags on, we cannot rule out supply disruptions, especially for private brand (PB) products." Some companies are reportedly considering cutting production of low-selling items and prioritizing packaging allocation for flagship products.
◇ Industry sees April as the first inflection point
The industry views April as the first inflection point. Korea is vulnerable to supply chain shocks because it brings in about 70% of its crude and about half of its naphtha through the Strait of Hormuz. The government is reviewing diversification of import sources and export adjustments, but it is expected to take time to secure actual volumes.
A food industry official said, "If packaging companies are delayed in further securing raw material inventories, production and shipments will inevitably be disrupted first at small and midsize manufacturers," adding, "Starting in April, the longer the Middle East risk persists, the more large corporations will be affected from May to June."
Seo Yong-gu, a professor in the business administration department at Sookmyung Women's University, said, "If a bottleneck occurs in packaging amid growing supply chain uncertainty due to a protracted war, sales and supply themselves could come to a halt," adding, "There are limits to responses at the level of individual corporations, so government-level measures to stabilize supply chains must proceed in parallel."