Asia's Energy Crisis Spills Over into Industries

Asia Supply Chain Disruptions Worsen Amid Middle East Tensions

March 26, 2023

The ongoing conflict in the Middle East is causing widespread supply chain disruptions in Asia, with companies scrambling to secure raw materials and consumers stockpiling essential goods. The Strait of Hormuz, a critical waterway through which 20% of the world's oil and liquefied natural gas passes, has been disrupted, exacerbating the crisis.

South Korea, heavily reliant on crude oil, gas, and fertilizers from the Middle East, is particularly vulnerable to supply disruptions. Samyang Foods, a leading instant noodle manufacturer, has warned of potential shortages of packaging materials and increased costs due to a prolonged conflict. Nongshim, a rival ramen producer, has two to three months of inventory of packaging material, but is preparing for the possibility of extended supply disruptions.

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Yonwoo, a container maker for cosmetics and personal care firms, is facing challenges in securing plastic resin, a critical component in manufacturing containers for skincare and cosmetics products. The company has limited visibility on supply beyond June, highlighting the uncertainty and risk associated with the ongoing conflict.

Global companies are also feeling the impact of supply chain disruptions, with Michelin and Takashimaya grappling with challenges such as rising costs, weakening demand, and disrupted supply chains. Yamayoshi Seika, a Japanese snack food manufacturer, has halted production due to a shortage of heavy oil used for its boilers.

Key Statistics:

• 50%: Price increase of some raw materials for South Korean factory manager Choi Gun-soo's suppliers
• 20%: Reduction in production capacity for Choi Gun-soo's factory
• 1/5: Proportion of the world's oil and liquefied natural gas that passes through the Strait of Hormuz
• 1/3: Expected decline in China's synthetic rubber output in April due to the war

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Companies Affected:

• Samyang Foods
• Nongshim
• Yonwoo
• Michelin
• Takashimaya
• Yamayoshi Seika