Former Japan Trading House Head Warns of Naphtha Supply Crunch

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(Bloomberg) — Japan is likely to face a shortage of naphtha-derived chemical products as early as the end of June, the former head of a major trading house said, in comments that contrast with the government’s view that supplies will last into next year.

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Fumiya Kokubu, a visiting fellow at The Institute of Energy Economics, Japan, said Monday it would be “impossible” to procure alternatives for the 15 million kiloliters of naphtha a year that the country sourced from the Middle East before the war in the region began nearly three months ago.

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“A massive supply source has disappeared,” the former president and chairman of Marubeni Corp. told a webinar. He added that it’s “not very realistic” to continue purchasing large volumes of naphtha from the US, one of the countries to which Japan has turned for alternative supplies, and that the issues run deeper than distribution bottlenecks previously cited by the government.

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Kokubu was not specific about conditions that might lead to the predicted shortage, including whether his forecast would change in the event of a resolution to the conflict and the reopening of the Strait of Hormuz.

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Since the war began, the Japanese government has said repeatedly that the country has enough supplies of fuel and petrochemical products. Unlike some of its Asian neighbors, the nation has refrained from asking households and businesses to curb energy use, although nearly three-quarters of the public called for energy-saving in a recent poll.

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Japan has been tapping into its vast strategic oil reserve, and the government has also said it secured fuel from regions outside the Middle East. The Japan Petrochemical Industry Association said last week that imports of naphtha from beyond the region – including the US – could reach around 1.4 million kiloliters in May.

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That would be a threefold increase from pre-war levels, potentially offsetting lost supply from the Persian Gulf region, the industry lobby group’s managing director, Katsuya Shimura, said at a press conference Thursday.

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Still, several Japanese firms have responded to the supply disruptions by modifying output that involves naphtha-derived products. Calbee Inc., the country’s biggest potato-chip maker, is using just two colors on its packaging due to an ink shortage, while toilet and household materials manufacturer Toto Ltd. briefly suspended orders for its prefabricated plastic baths.

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—With assistance from Shoko Oda and Yusuke Maekawa.

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