End-of-June Naphtha Squeeze Looms Over Japan Industry After Hormuz Closure

Japan is contending with a deepening shortage of naphtha and naphtha-derived chemical products, with industry warnings pointing to a sharper crunch toward the end of June 2026. The disruption stems from the closure of the Strait of Hormuz, effectively shut since February 28, 2026, after the outbreak of the Iran war cut off the main maritime route for Middle Eastern petroleum exports.

Japan imports more than 60 percent of its naphtha and historically sources around 70 percent of those volumes from Gulf producers. The country held only about 20 days of naphtha inventories when the conflict began, leaving the petrochemical sector highly exposed compared with crude oil, where Japan maintains roughly 250 days of strategic reserves.

By mid-March 2026, six of Japan's 12 ethylene plants had reduced output. Mitsubishi Chemical Group, Mitsui Chemicals, Cosmo Energy Holdings and Idemitsu Kosan all announced production cuts at facilities including the Chiba and Tokuyama complexes. The national ethylene plant utilization rate fell to a record low of 68.6 percent in March, according to industry data.

Asian naphtha benchmark prices climbed roughly 60 to 66 percent after the conflict began, reaching about 1,300 USD per ton for first-half May cargoes against pre-war levels near 700 USD. Japanese buyers paid premiums of more than 100 USD per ton over reference quotes to secure replacement cargoes from India, the United States, Europe and, more recently, Russian origins re-entering the Asian trade.

Prime Minister Sanae Takaichi told a cabinet meeting on April 30, 2026 that Japan had secured naphtha supplies expected to last beyond 2026 and into 2027, with imports forecast to triple in May 2026. The government tapped domestic refining capacity and diversified suppliers to ease the immediate feedstock crunch.

Despite reassurances on aggregate supply, bottlenecks persist in specific downstream chemical products. Government stockpiles count intermediate materials such as polyethylene and polypropylene pellets, which cannot be reprocessed back into solvents like those used for printing inks. This structural gap has left several industries facing acute shortages even as headline naphtha figures look adequate.

A former senior executive from a major Japanese trading house warned in late May 2026 that shortages of specific naphtha-derived chemical products could intensify by the end of June, when current downstream inventories are expected to run thin. Reports compiled by Teikoku Databank identify 52 Japanese companies that produce basic chemicals such as ethylene, synthetic rubber and PVC resin from naphtha, supplying around 46,741 manufacturers, or roughly 30 percent of all manufacturing firms in Japan.

The consumer impact is already visible. On May 12, snack maker Calbee announced it would switch 14 of its most popular potato chip and granola products to black-and-white packaging from May 25, citing limited supply of ink solvents derived from naphtha. A Kyodo News poll over the weekend of May 16 to 17, 2026 found that more than 70 percent of Japanese respondents expressed concern about naphtha supply. Environment Minister Hirotaka Ishihara was prompted to publicly assure the public that garbage bag supplies remain secure.

A survey by an industry association in the Kanto region found that around 70 percent of respondents could not secure required raw materials in April 2026. Some solvents have been unavailable since early March. Paint manufacturers in Fukuoka Prefecture reported daily price-hike notices from suppliers, with increases ranging from 30 percent to more than 50 percent. Within the chemical, petroleum and coal products manufacturing sector, 67.2 percent of the roughly 4,700 companies are integrated into the naphtha supply chain.

South Korea, which faces a similar exposure, restricted naphtha exports for five months starting March 28, 2026 and redirected about 11 percent of domestically produced naphtha to local buyers. LG Chem temporarily shut down its No. 2 naphtha cracker at the Yeosu complex. The combined response across Northeast Asia has tightened regional balances further.

Several Japanese chemical producers are accelerating consolidation plans that pre-date the war. Idemitsu Kosan and Mitsui Chemicals are merging ethylene production facilities in Chiba, reducing combined capacity to 550,000 tons per year. Maruzen's Chiba cracker is scheduled for closure in 2026 or 2027, and Eneos Kawasaki is expected to be decommissioned by 2028. The current crisis risks pulling forward decisions on permanent capacity reductions.

Analysts at Citigroup, Pelham Smithers Associates and corporate advisory firm BCMG have flagged that the cascading effect of a sustained naphtha squeeze will reach plastics, packaging, automotive parts, food containers, medical supplies, paints, adhesives and electrical insulation. Japan has also set up a 10 billion USD fund to help Southeast Asian economies procure crude oil and secure medical product supply chains.

The situation remains active as of May 25, 2026, with reported United States and Iran negotiations progressing but no firm timeline for the reopening of the Strait of Hormuz. The end-of-June pressure point flagged by the former trading house executive is now a key inflection date for Japan's industrial supply chain.