The Lie of Doubled Naphtha Arrivals: Why Japan's Manufacturing Industry Will 'Suffocate' in July
The raw material known as "naphtha" is the "super-basic ingredient" for making clothing. If you compare the process from naphtha to finished clothing to cooking, it looks like this:
1) "Prep" the naphtha to create the "raw material for fabric" such as polyester or nylon
2) Spin that material into "thread"
3) "Weave the thread into fabric"
4) "Cut and sew" the fabric to complete the clothing
In fact, about 70% of Japan's clothing is made by tracing back to this naphtha. What is currently becoming a problem in the news is that at this "prep" stage (the raw materials for thread and fabric), naphtha is already running short.
That is why the industry screamed, "We're out of materials! This is bad!" The Ministry of Economy, Trade and Industry proudly declared, "It's okay! We bought more naphtha from around the world than usual!"
They reportedly secured 900,000 tons, which is double the usual amount. However, the naphtha that arrived was like "cheap, fatty meat". Even though twice as much arrived, once you trimmed away the unusable parts, it only amounted to about 1.2 times the usual supply.
While good naphtha (like high-quality, light olive oil from the Middle East) can be used to make plenty of clothing fabric, plastics, and detergents, the heavy naphtha we obtained this time (like thick lard or heavy cream) only yields about half of the good parts.
As a result, we couldn't produce as much polyester, acrylic, or plastic as we wanted. So, even though twice the material arrived, after trimming away the unusable parts, we only got about half the amount of good meat, resulting in only about 1.2 times the supply, which caused the operating rate to drop sharply.
Moreover, as material costs have soared, the burden is being pushed onto subcontractors and clothing manufacturers.
This is not just about clothing. Parts made from naphtha are used in everything, as I wrote last week, including automobiles, smartphones, computers, communication equipment, syringes, IV bags, and factory machinery.
"With the naphtha currently available, we don't have nearly enough of the necessary parts," has become clear. The problems continue. Because there is a scramble for naphtha all over the world, prices are skyrocketing.
Furthermore, because it has to be transported from far away, there is a shortage of ships (tankers), and it takes longer to transport.
And this is the most troublesome part. Once you trim off the fat and gristle, you put them into a bucket (tank) for disposal. But this bucket has a fixed size, and it fills up in no time.
Once it is full, you cannot trim off any more fat, so you have to stop the meat processing work itself. In other words, even if the raw meat is still arriving, the naphtha production process stops because there is "nowhere to throw away the fat."
If that happens, there is a risk that a chain reaction of "parts aren't arriving, so operating rates are dropping, or in the worst case, operations are stopping" will occur in many factories across Japan.