From beer to cosmetics, Asia feels full force of war-fuelled energy crisis

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* Asia most vulnerable to Middle East supply disruptions

* South Korean businessman says suppliers are increasing prices by up to 50%

*Cosmetic packaging manufacturer striving to secure plastic resin

* Consumers rush to stock up on garbage bags and noodles

By Hyunjoo Jin, Daewoung Kim and Sophie Yu

SEOUL/BEIJING, March 26 (Reuters) – From beer and chips to noodles, toys and cosmetics, companies and consumers across Asia are bracing for a crisis as the Iran war wreaks havoc on supply chains, plastics and oil supplies, disrupting daily life and sending prices soaring. For many, this is already a critical time. Choi Gun-soo, manager of a 57-year-old South Korean factory that produces plastic films used by farmers and television manufacturers to cover crops, said his suppliers had increased prices of some raw materials by as much as 50%, while other suppliers were running out of stock.

“As we run out of raw materials for some products, we will have to gradually shut down the machines and the next one to two weeks will probably be very critical,” he said. Although they had weathered the COVID-19 pandemic as well as oil shocks, the impact of the war was unprecedented, Choi said, adding that the company had reduced production to only 20% to 30% of normal production.

“This is the first time we’ve been hit this hard. We’re really shaken.” At the center of the supply chain disruption is the Strait of Hormuz, a narrow strip of water off Iran’s southern coast through which roughly a fifth of the world’s oil and liquefied natural gas normally passes.

Asia, which is more dependent on crude oil, gas, fuel and fertilizer from the Middle East than other parts of the world, is the region most vulnerable to supply disruption.

The most severe shortages are now in oil derivatives such as naphtha, which is sourced predominantly from the Gulf and is used in refineries in Asia to make plastics and other petrochemicals used in almost every manufactured product.

The prices of some basic materials of modern life, such as plastic and rubber, are already reaching records.

South Korea’s Samyang Foods, maker of the popular spicy Buldak instant ramen noodles, said a prolonged conflict could lead to a shortage of packaging materials and increase costs. Ramen noodles are often sold in packets, containers or bowls, making them largely reliant on polyethylene terephthalate (PET), one of the world’s most widely used plastics that also plays a key role in packaging other products, from foods to personal care.

Rival South Korean ramen maker Nongshim said it had a two- to three-month stockpile of packaging materials and was preparing for the possibility of a continuation of the war that began with the U.S.-Israeli attack on Iran on Feb. 28. Yonwoo, a container maker for K-beauty companies including L’Oreal and Amorepacific, told Reuters it was seeking to obtain stocks of plastic resin to produce containers used in skin care and cosmetics. It was stated that there was little visibility on the material after June.

“The problem is not the price; if the supply itself is not available, then you cannot sell the product without containers,” a company official told Reuters, declining to be named because he was not authorized to speak to the media. he said.

“We are stockpiling supplies but beyond that we don’t have any significant measures in place; we just hope the situation will be resolved by May.” The war has triggered fuel shortages around the world, and businesses from airlines to supermarkets and second-hand car dealers are grappling with challenges such as rising costs, weakening demand and disrupted supply chains.

Takashimaya, a department store operator in Japan, said that if the crisis continues, price increases and supply concerns are likely to spread to clothing and household appliances. Underlining the scale of the impact, fans of Japan’s Wasabeef chips were alarmed this month after manufacturer Yamayoshi Seika halted production, citing a lack of heavy oil used in the boilers that heat the oil to fry the snacks.

RISING COSTS OF RAW MATERIALS ARE SUFFERING

China produces almost half of the world’s synthetic rubber, and shortages of the naphtha needed to supply it trickle down the supply chain; It is forcing manufacturers of products such as tires and gloves to consider raising prices or switching to natural rubber.

China’s output is expected to fall by about a third in April due to the war, according to SCI analysts Xinhua Jing.

Tire maker Michelin told Reuters its supply chain teams were “fully mobilised” and were managing and arranging deliveries to comply with the company’s contracts “to the extent possible”. In India, war has already made bottled water more expensive due to rising prices of plastic bottles and caps, while global brewers operating there have warned of price increases and supply disruptions due to gas shortages.

High oil prices and supply chain shocks are also felt in China’s southern manufacturing hub of Dongguan.

Liu Chaonan, whose toy company supplies materials to companies such as US retailer Walmart, said that increasing raw material costs have a negative impact.

“The situation in Iran is having a very significant impact on our toy industry,” Liu, who employs more than 150 people, told Reuters. “We will likely make price adjustments as we offer new products.”

Higher crude oil prices are reflected directly in retail fuel prices, increasing the cost of gasoline, diesel, aviation fuel, cooking gas, and business and manufacturing operations worldwide.

SUPPLY CONCERNS TRIGGER PANIC BUYING

Dominic Desmarais, chief solutions officer at Liya Solutions, which connects companies with suppliers in China that make everything from furniture to titanium products, said the price of everything made from oil has increased.

“We are buying a lot of expandable polystyrene from Taiwan and the prices have increased by 35%, but our customer still bought about 500 tons and they did not argue about the price, they just want supply,” he said.

Panic has already begun among consumers, leading to hoarding of goods such as garbage bags; South Korean supermarkets are reporting shortages and limiting purchases.

Ryu June-ho, a 24-year-old South Korean student, grabbed garbage bags as well as ramen noodles this week.

“I was worried the trash bags would be more expensive, so I bought ten 20-litre ones. I also bought a bunch of ramen… because the cost of the plastic packaging is probably a big part of the price of the product.”

(Reporting by Hyunjoo Jin, Minwoo Park, Daewoung Kim and Heejin Kim in Seoul, Sophie Yu and Lewis Jackson in Beijing, Sam Nussey and Kentaro Okasaka in Tokyo, Casey Hall in Shanghai, Aditya Kalra in Delhi, Ruth Chai in Singapore, Sam Li in Beijing; Writing by Anne Marie Roantree; Editing by Kate Mayberry)