NAGOYA - Japan's naphtha shock may be entering a new phase, with signs that product shortages are gradually easing in some industries while concerns grow that higher transportation costs could drive up prices across the supply chain.
Although the government has repeatedly emphasized that inventories remain sufficient, manufacturers and distributors have continued to report difficulties obtaining materials. The gap between official assessments and conditions on the ground appears to be narrowing, but supply disruptions have not fully disappeared.
According to data released by the Ministry of Economy, Trade and Industry, naphtha is used upstream to produce basic petrochemical products such as ethylene, which are then processed into intermediate materials including polyethylene before being turned into petroleum-based products used in everyday life.
Inventory levels remain relatively high for some products. Materials used in food trays, for example, are estimated to have stockpiles equivalent to 3.6 months of demand. Thinners, which have frequently been cited by businesses as being in short supply, reportedly have inventories equivalent to about two months of demand.
Despite those figures, companies are still experiencing difficulties. A painting contractor in Nagoya said deliveries remain far from normal, with smaller shipment volumes and longer wait times than before the disruption. The situation suggests that supply-chain bottlenecks continue even where inventories appear adequate on paper.
Questions have also surrounded the supply of prefabricated bathroom units, known as unit baths, which had been identified as a product facing shortages. Data from the Kitchen and Bath Industry Association showed shipments reached 102% of the previous year's level in March and 99% in April, indicating that overall shipments have not fallen significantly compared with a year earlier.
The figures raise questions about why shortages were widely reported at construction sites and among suppliers. Nevertheless, industry groups now expect stable product supplies to be maintained under normal ordering conditions.
A key factor behind the improved outlook is the growing certainty surrounding crude oil procurement.
Before the disruption, Japan relied on Middle Eastern crude oil for more than 90% of its supplies. During May, released strategic stockpiles helped supplement supplies. In June, imports from Middle Eastern producers outside the Strait of Hormuz route increased, while additional shipments from the United States helped support supply stability.
If U.S. crude continues to arrive steadily, physical shortages may gradually disappear. The next challenge, however, is likely to be cost.
Middle Eastern crude has traditionally been transported to Japan by large tankers in voyages taking about 20 days. U.S. crude presents a different logistical picture. Shipments from Texas, for example, typically travel through the Panama Canal, where vessel size restrictions often limit cargoes to medium-sized or smaller tankers while extending transit times and increasing transportation costs.
Using larger vessels would require a much longer route, potentially taking around 60 days to reach Japan. Crude from Alaska has attracted attention as an alternative because transit times are shorter than from the Middle East, but the use of large tankers remains challenging, meaning transportation expenses are still expected to be higher.
As a result, industry observers increasingly expect that higher shipping costs will eventually be passed on to manufacturers and consumers through higher product prices, signaling that Japan's naphtha shock may be moving from a supply crisis into a cost crisis.
Source: CBC
