Middle East Tensions Push Up Japan's Chemical Prices

Highlights

• Rising chemical prices in Japan driven by Middle East tensions and naphtha supply disruptions.
• Over 40% of Japan’s naphtha imports come from the Middle East, affecting ethylene and propylene production.
• At least six of Japan’s twelve ethylene facilities have cut output; capacity utilization lowered to maintain operational readiness.
• Shin-Etsu Chemical Co., Tosoh Corp., and Denka Co. announce significant price hikes for PVC, polyethylene, and polyvinyl alcohol due to rising raw material costs.
• Domestic inventories currently cover 2–4 months of demand, minimizing immediate supply risk.
• Industry leaders warn small and midsize companies may face operational challenges if high naphtha prices persist.

Rising Chemical Prices Amid Mideast Crisis

GuideView reports that chemical prices in Japan are climbing as escalating tensions in the Middle East ripple through the global supply chain. Analysts warn that household budgets could be squeezed if manufacturers transfer higher raw material costs to consumer products. Liquid naphtha, a refined product of crude oil, is at the center of this chain reaction. Chemical producers rely on naphtha to create basic petrochemicals such as ethylene and propylene, essential feedstocks for materials used in food packaging, building supplies, and other everyday products. Notably, over 40 percent of Japan’s naphtha imports originate from the Middle East.

Production Cuts and Supply Chain Impact

With the Strait of Hormuz effectively closed, Japanese companies are preemptively reducing ethylene output due to expected disruptions in naphtha supply. At least six out of twelve ethylene production facilities in Japan have cut production, opting to lower capacity utilization while keeping plants online, given the lengthy restart process that exceeds one month. This reduction in ethylene output, combined with rising naphtha prices, has triggered price hikes for downstream chemical products, often referred to as “derivatives.”

Company-Specific Price Hikes

Shin-Etsu Chemical Co. announced it will raise domestic prices for polyvinyl chloride (PVC) resin by approximately 20 percent, effective for deliveries starting April 1. PVC resin is commonly used in water pipes and construction materials due to its ease of processing and flame resistance. Similarly, Tosoh Corp. plans to increase prices for polyethylene, a material used in food containers and medical IV bags, citing the surge in naphtha costs. Both companies noted that the magnitude of these hikes exceeds previous adjustments. Denka Co. has also raised prices for polyvinyl alcohol, a resin used in adhesives, by 5 to 10 percent, attributing part of the increase to higher naphtha prices.

Inventory Levels and Industry Outlook