Middle East tensions disrupt oil supply routes, forcing Japanese chemical firms to cut production and warn of potential price hikes.
The ongoing tensions in the Middle East are beginning to create serious concerns for Japanese industries, particularly the chemical sector, which fears that rising crude oil prices could eventually lead to higher prices for a broad range of everyday products. Several Japanese chemical companies have already started scaling back petrochemical production while warning that the prolonged crisis could disrupt supply chains and push up manufacturing costs.
The situation escalated after Iran effectively imposed a blockade on the Strait of Hormuz following military strikes carried out by the United States and Israel. The Strait of Hormuz is one of the world’s most critical oil transit routes, and a large portion of Japan’s crude oil imports from the Middle East passes through this narrow waterway. Any disruption to shipping through the strait threatens to tighten global oil supply and push energy prices higher.
According to Takahisa Takahara, president of Unicharm Corp., the immediate impact on the company’s operations may remain limited for the next few months. However, he cautioned that if the geopolitical tensions persist beyond the summer period, the consequences could begin to significantly affect production costs and business operations. Unicharm manufactures a wide range of daily-use products such as disposable masks, diapers, and sanitary items, most of which rely heavily on petrochemical-based materials.
Although the company currently maintains sufficient inventories of key materials and finished goods, the intensifying conflict has prompted internal discussions about revising its cost strategies for the fiscal year ending in December. Rising oil prices could increase the cost of petrochemical raw materials used across multiple manufacturing industries.
Petrochemical derivatives play a crucial role in the production of many consumer goods, including food packaging materials, textiles, automotive components, and household products. In Japan, petrochemical manufacturers typically produce key base materials such as ethylene by processing naphtha, which is obtained during the refining of crude oil into fuels like gasoline and diesel. Ethylene is then further processed into plastics, synthetic fibers, and other chemical products that ultimately reach consumers in items like PET bottles, vehicle tires, and appliance parts.
Amid the uncertain supply outlook, Mitsubishi Chemical Corp. announced that it had begun reducing ethylene production at its facility in Ibaraki Prefecture starting March 6. The company explained that ongoing developments in the Middle East made a potential decline in naphtha supply increasingly likely. By cutting production early, the firm hopes to avoid a sudden shutdown of its facilities in case raw material supply becomes constrained.
Similarly, Idemitsu Kosan Co. informed numerous customers that it might temporarily suspend operations at its ethylene plants located in Yamaguchi and Chiba prefectures. This potential disruption could have a cascading impact on companies that depend on its output. For instance, Tosoh Corp., which obtains ethylene through pipelines from Idemitsu within the same industrial complex in Yamaguchi, warned that its own production could be severely affected if Idemitsu halts operations.
Meanwhile, international supply disruptions have already started to emerge. Singapore-based petrochemical manufacturer PCS Pte., in which Sumitomo Chemical Co. indirectly holds nearly a 40 percent stake, declared force majeure on March 5. This legal notice indicates the company may not be able to fulfill contractual supply commitments due to circumstances beyond its control. A subsidiary of Sumitomo Chemical in Singapore issued a similar notice the following day.
Although these Singapore operations do not directly supply large volumes to Japan, disruptions at global petrochemical hubs can still create ripple effects across international supply chains.
In response, many Japanese companies are exploring contingency measures such as releasing stored inventory or seeking alternative procurement channels. However, if crude oil prices continue to rise for an extended period, chemical producers may have little choice but to absorb higher production costs and eventually pass them on to customers.
Industry representatives note that while companies may initially absorb some of the financial pressure, long-term cost increases would likely lead to higher product prices, ultimately placing the burden on consumers and households.
