Naphtha Prices Rise Sharply in Asia Following Strait of Hormuz Disruption

Asia is facing plastics shortages because of an oil and gas supply crunch caused by the war in the Middle East. Medical supplies, packaging, and consumer products in Asia are most vulnerable to a plastics supply 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.

The price of naphtha has doubled in Asia as a result of the supply squeeze. com reported. Japan said earlier this month it has secured sufficient volumes of naphtha until the end of the year.

The statement offered reassurance for one major buyer even as others scramble. Indonesia, for one, is facing a crisis in the naphtha supply industry. Sector players in Indonesia warn that plastics producers may have to suspend operations due to the lack of naphtha supply.

Indonesia is almost entirely dependent on imports for its naphtha supply. Most of Indonesia's naphtha imports come from the Middle East.

U.S. And Israeli missile strikes on Iran. Asian countries have been buying all the oil they can get their hands on since then. Asia is the biggest consumer of Middle Eastern oil, gas, and petrochemical feedstocks such as naphtha.

Thanks to an ample supply of seaborne crude oil, mostly consisting of sanctioned Russian and Iranian crude, the initial shock from the fallout of the war was somewhat mitigated. As that supply runs out, the shock is looming ever larger. The first signs of the trouble ahead are now emerging in the plastics sector.

Governments across Asia rushed to cushion the blow with price caps on fuel, subsidies, and even rations as supplies dried up. The physical shortage of the key feedstock, however, will be difficult to overcome with any of these measures. com reported that the naphtha crisis marks the latest consequence of the Hormuz closure that began at the end of February.