I never thought a day would come when we couldn't do interior work because there's no bond (adhesive).
On the 27th in Gangnam District, Seoul, at an interior store. As the customer who had finished the consultation turned to leave, the owner closed the estimate. "We need 45 units of adhesive, but they say they can only give us 5." Prices have also risen by nearly 50%. The owner ultimately gave up on the contract. On sites, even projects already underway are grinding to a halt. The "naphtha shock" triggered by the Middle East crisis has hit the interior industry.
◇"From prices to supply"… jobs halted one after another
According to the interior industry on the 30th, the biggest thing blocking work on sites is adhesive (bond). It's an essential material used in almost every process, including tile, wood, and flooring. A business owner in Gangnam, identified as Mr. A, said, "There's no process that doesn't use bond," adding, "It's not just that prices have gone up; it's a 'void' where it's simply unavailable." The stock actually secured was about one-tenth of usual levels.
The cause is naphtha. As a basic raw material for synthetic resin production, its supply chain has snarled since the Middle East crisis. The government also restricted naphtha exports for five months starting on the 27th. A representative at bond maker Company B said, "Of the 500 items we sell, 10% to 20% are already marked out of stock," adding, "The number of suspended items is likely to grow."
A representative at bond maker Company C also said, "We are experiencing production disruptions," adding, "We've seen raw material prices rise many times, but this is the first time supply itself has completely dried up."
The fallout is spreading quickly. Naphtha-based products such as polyvinyl chloride (PVC) and paint have also raised prices one after another. Noroo Paint and Samhwa Paint Industrial have raised product prices by 20% to 55% since the 23rd, and KCC has increased supply prices by up to 40%.
A domestic tile company also recently notified its clients of a unit price increase. In an official notice, the company said, "We have adjusted supply prices due to rising cost factors such as the recent steep increase in raw material prices and a surge in exchange rates," and explained, "We have reached the limit where it is difficult to maintain existing unit prices while providing stable quality and service."
On sites, people are saying "estimates themselves no longer mean anything." Interior contracts are typically signed two to three months before groundbreaking, but it's hard to predict how much material prices will rise in the meantime.
Kang, 45, who runs a company in Gyeonggi Province, said, "When we explain that construction costs may go up, customers walk away from contracts," adding, "I'm considering shutting down operations entirely until fall."
Some companies are not taking new contracts. If they can't reflect the increase in material prices, they have no choice but to absorb losses. An industry official said, "Material unit prices are adjusted every quarter, but the fluctuation range is so large now that the contract itself has become a risk."
◇Consumers also take a direct hit… concerns over prolonged impact
Consumers are also taking a direct hit. Kwon, 32, a bride-to-be set to move in next month, said, "They say they'll apply the price increase even if we sign now, so we're postponing the decision." Kim, 36, who is considering buying an older apartment, also said, "Real estate expenses are already a burden, and if interior expenses rise too, we'll have to rethink our plans."
At sites where contracts have already been signed, conflicts are emerging over additional expenses. The industry says, "Once material prices go up, they don't come down easily," and expects "disputes over extra charges are likely to increase."
Many expect the situation will be hard to resolve quickly. As clashes between the United States and Israel and Iran continue, uncertainty in the raw materials market is growing. According to Opinet, the oil price information system of the Korea National Oil Corporation (KNOC), the international naphtha price stood at $133.74 per barrel as of the 27th, nearly double from a month earlier ($68.87).
A petrochemical industry official said, "We have entered emergency management, but we're only barely maintaining plant operating rates," adding, "Accordingly, product output is also decreasing, so the supply gap may continue to widen."