Asia is facing plastics shortages because of the oil and gas supply crunch caused by the war in the Middle East, with medical supplies, packaging, and consumer products most vulnerable to a shock, the Financial Times has reported.
The biggest problem for the world’s largest plastics-producing region is the shortage of naphtha, a key plastics feedstock. As a result of the supply squeeze, the price of the feedstock has doubled in Asia, leading to higher prices for a wide variety of products, contributing to already worrying inflation trends in Asia.
Japan said earlier this month it has secured sufficient volumes of naphtha until the end of the year but other Asian countries have not been so lucky. Indonesia, for one, is facing a crisis in the naphtha supply industry, as sector players warn plastics producers they may have to suspend operations due to the lack of supply. Indonesia is almost entirely dependent on imports for its naphtha supply, and most of these imports come from the Middle East.
Asian countries have been buying all the oil they can get their hands on since the Strait of Hormuz shut down for business at the end of February, following U.S. and Israeli missile strikes on Iran. Thanks to an ample supply of seaborne crude oil, mostly consisting of sanctioned Russian and Iranian crude, the shock from the fallout of the war was initially somewhat mitigated—but not for long. As that supply runs out, the shock is looming ever larger, and now the first signs of the trouble that lies ahead are emerging.
Asia is the biggest consumer of Middle Eastern oil, gas, and petrochemical feedstocks such as naphtha. As the supplies dried up, governments rushed to cushion the blow with price caps on fuel, subsidies, and even rations. The physical shortage of the key feedstock, however, will be difficult to overcome with any of these measures.
By Irina Slav for Oilprice.com
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