War in Iran Disrupts Asian Supply Chains, Affects Everything from Food to Cosmetics

The ongoing conflict in Iran is causing severe supply chain disruptions across Asia, with companies facing shortages of raw materials and soaring prices. Industries from food packaging to cosmetics manufacturing are struggling as oil derivatives become scarce, forcing some factories to shut down production lines.

SEOUL/BEIJING – Asian manufacturers are confronting an unprecedented supply crisis as the conflict in Iran disrupts global energy markets, affecting everything from instant noodles and snack foods to beauty products and toys.

The impact is already devastating businesses across the region. Choi Gun-soo, who manages a South Korean facility that has produced plastic films for 57 years, reports that suppliers are hiking raw material costs by up to 50%, while others have completely exhausted their inventory.

“Since we’re out of raw materials for some products, we’ll have to gradually shut down the machines, and the next one to two weeks is likely to be very critical,” Choi explained.

Despite surviving previous oil crises and the COVID-19 pandemic, this situation is different, according to Choi. His facility has slashed production to just 20% to 30% of normal capacity.

“This is the first time we’ve been hit this hard. We’re really shaken,” he stated.

The crisis stems from disruptions in the Strait of Hormuz, the narrow waterway along Iran’s southern border that typically handles approximately 20% of global oil and liquefied natural gas shipments.

Asian nations face the greatest risk because they depend more heavily on Middle Eastern crude oil, natural gas, fuel, and fertilizer compared to other regions worldwide.

The most severe shortages involve oil-based products like naphtha, primarily obtained from Gulf nations and essential for Asian refineries producing plastics and petrochemicals found in nearly all manufactured goods.

Costs for essential materials including plastic and rubber have reached record highs.

Samyang Foods, the South Korean company behind the widely popular spicy Buldak instant ramen, warns that an extended conflict could create packaging material shortages and drive up expenses.

Instant ramen products depend heavily on polyethylene terephthalate (PET), one of the most commonly used plastics globally, which is also crucial for packaging various items from food to personal care products.

Competing South Korean ramen manufacturer Nongshim maintains a two to three-month supply of packaging materials and is preparing for the possibility that the war, which started with U.S.-Israeli attacks on Iran on February 28, may continue.

Yonwoo, which produces containers for L’Oreal and Korean beauty companies including Amorepacific, informed Reuters that it is working urgently to obtain plastic resin supplies needed for manufacturing skincare and cosmetic containers. The company has limited material visibility beyond June.

“The issue isn’t the price – if supply itself isn’t available, then without containers, you simply can’t sell the product,” an unnamed company representative told Reuters, noting they lacked authorization to speak publicly.

“We are stockpiling supplies, but beyond that, we don’t really have any substantial measures in place; we’re simply hoping that the situation would be resolved by May.”

The conflict has created fuel shortages globally, with businesses ranging from airlines to grocery stores and used car dealerships facing challenges including increased costs, declining demand, and broken supply chains.

In Japan, department store chain Takashimaya indicated that if the crisis continues, price increases and supply problems could extend to clothing and home appliances.

Demonstrating the widespread effects, Japanese consumers of Wasabeef potato chips became alarmed this month when producer Yamayoshi Seika stopped manufacturing, citing a lack of heavy oil needed for boilers that heat frying oil.

China manufactures nearly half of the world’s synthetic rubber, and naphtha shortages required for production are creating downstream effects, pushing tire and glove manufacturers to consider price increases or switching to natural rubber alternatives.

Chinese production is expected to drop by approximately one-third in April due to the war, according to SCI analyst Xinhua Jing.

Tire manufacturer Michelin told Reuters that its supply chain teams are “fully mobilised” and the company is managing and modifying deliveries to fulfill contracts “as much as possible.”

In India, the conflict has already increased bottled water costs due to rising prices for plastic bottles and caps, while international brewing companies operating there have cautioned about price increases and supply interruptions caused by gas shortages.

High oil prices and supply chain disruptions are also affecting China’s southern manufacturing center of Dongguan.

Liu Chaonan, whose toy manufacturing business supplies major U.S. retailer Walmart, said escalating raw material expenses are creating significant challenges.

“The situation in Iran is having a very significant impact on our toy industry,” Liu, who has more than 150 employees, told Reuters. “We will likely make price adjustments when quoting new products.”

Rising crude oil prices directly influence retail fuel costs, increasing expenses for gasoline, diesel, aviation fuel, cooking gas, and business and manufacturing operations globally.

Dominic Desmarais, chief solutions officer at Liya Solutions, which connects companies with Chinese suppliers producing everything from furniture to titanium products, noted that petroleum-based product prices are climbing.

“We buy a lot of expandable polystyrene from Taiwan, and the prices went up 35%, but our client still bought about 500 tonnes, and they didn’t argue on the price, they just want supply,” he explained.

Consumer panic has already emerged, leading to stockpiling of items like garbage bags, with South Korean supermarkets experiencing shortages and implementing purchase limits.

South Korean student Ryu June-ho, 24, recently purchased trash bags along with ramen noodles.

“I was worried that garbage bags would get more expensive, so I bought ten 20-litre ones. I also bought lots of ramen … because the cost of plastic packaging probably accounts for a big part of the product’s price.”