Raw-material snarls in Korea to ripple across Asia factories

South Korea’s trucker strikes are threatening to disrupt wider supply chains in Asia as warehouses fill up with undelivered raw materials used to make everything from clothing to cars. 

Trucker protests are taking place for a seventh day in the country, and inventories at major chemical producers are climbing. Prolonged disruptions to logistics are likely to force South Korean companies that make a diverse array of chemical products to cut production, impacting factories elsewhere in Asia that use the material to make consumer goods.

LG Chem Ltd. and  Hanwha Totalenergies Petrochemical Co. warned Monday that they would most likely have to at least partly suspend output at some plants if the strike continue. 

The situation is concerning as South Korea is a major exporter of the chemical paraxylene to the Chinese textile industry and one of the largest sellers of polyvinyl chloride to Asian factories, according to Parsley Ong, the head of Asia energy and chemicals research at JPMorgan Chase & Co. The nation also exports synthetic latex and acrylonitrile butadiene styrene used in the auto industry to Northeast Asia and elsewhere in the region. 

“The trucker strike increases the challenges that chemical producers are already facing from high feedstock costs and a demand slowdown,” said Ong in an e-mailed reply to queries.

The disruption is dealing a further blow to ethylene cracker operators, which transform naphtha from refineries into plastic products. About 20 million tons per annum of ethylene capacity across Asia has already cut operating rates due to a slowdown in the global economy, according to JPMorgan estimates.