As Middle East–driven geopolitical risks drag on, the food industry is facing a double whammy of unstable packaging material supply and a decline in K-food exports. With packaging raw material prices rising due to a surge in naphtha prices, production conditions are being shaken, and the value of Korean food exports to the Middle East is plunging.
According to the distribution and food industries on the 27th, food packaging materials have recently been arriving in small quantities or repeatedly facing delivery delays, continuing supply instability. In particular, because supply volumes are limited and secured mainly by relatively large corporations, small and midsize food companies are reportedly struggling to secure the quantities they need in time.
A food industry official said, "For small companies and smaller partner firms, some auxiliary materials are running out of stock quickly, and we understand there is internal talk that May will be the critical point," adding, "We are placing orders earlier to prevent production disruptions, but even that is not easy."
In this situation, replacing packaging with different materials is also realistically difficult. Most production facilities are set up for plastic film packaging, so switching to paper and other materials would require equipment changes and could affect shelf life. A distribution industry official explained, "Rather than changing materials in the short term, we are responding by reducing empty space in packaging or adjusting specifications."
According to the March producer price index released by the Bank of Korea, last month's naphtha producer price index rose 68% from the previous month. A food industry official said, "There is continued upward pressure on prices across oil-related auxiliary materials—on average about 20–25%," adding, "Some of the increases have already been reflected in prices or are under price-increase negotiations."
K-food exports to the Middle East have also plunged. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), the value of food exports to the Middle East fell from $8.3 million (about 12.26 billion won) in February to $4.92 million (about 7.269 billion won) in March, a drop of more than 40% in a month. Exports of ramen, a key item for Middle East shipments, also fell about 28.5% over the same period, from $4 million (about 5.91 billion won) to $2.86 million (about 4.225 billion won).
A food industry official said, "As tensions rise in the Middle East, ocean freight rates are increasing, and growing uncertainty over some routes is causing more shipment schedules to be delayed," adding, "Local buyers are also acting cautiously overall by cutting short-term orders or delaying contract timing to reduce inventory risk." An official at a trading company said, "With greater volatility in exchange rates and oil prices, the import expense burden has risen," adding, "War has also dampened local purchasing power, so demand for imported food has plunged and sales are sluggish."
With difficulties in sourcing packaging raw materials compounded by declining exports, the industry expects overall supply chain uncertainty to grow for the time being. A food industry official said, "We see May, when inventories gradually run down, as the first critical point, but since supply has not been completely blocked, companies are responding by diversifying supply sources and adjusting orders," while adding, "If Middle East risks and raw material price volatility persist, we cannot rule out the possibility that expense burdens and supply instability will become prolonged."
Kim Tae-hwang, a professor in the Department of International Trade at Myongji University, said, "If the Middle East situation leads to instability in crude oil supply and higher prices, the burden of production costs will increase across industries that use petroleum-based raw materials such as packaging and plastics." He added, "Also, since K-food is more of a preference-based consumer good than a necessity locally, companies should keep in mind that demand may take time to recover even after the war ends and consider local marketing cooperation strategies."