IT may sound like a distant geopolitical crisis that has been going on for the past three months.
But the closure of the Strait of Hormuz could have very real consequences for every Malaysian, if the supply crisis is not resolved.
A total of 106 types of products imported by Malaysia pass through the Strait of Hormuz, based on data provided by think tank Southeast Asian Futures Initiative Centre (Seafic).
The imports are not limited to crude oil, but include raw materials to make plastic items, jewellery and even food products such as dates and pistachios.
Here are some common items that Malaysia imports via the strait. Click on each icon to see more details:
Each product is imported by Malaysia at varying amounts and percentages, but with the flow of supplies disrupted, its effects are wide and ripple down to the ground.
Even our beloved nasi lemak is not spared.
“The brown paper used to wrap nasi lemak is often coated with a layer of polyethylene (a type of plastic material used in food packaging to prevent oil from leaking).
“One possibility is that our nasi lemak will no longer be wrapped with such brown paper since the raw materials to make the plastic coating is imported by Malaysia through the Strait of Hormuz,” says Seafic researcher Dr Mikhail Rosli in an interview.
ALSO READ> Crude oil to cooking gas: Malaysia's most at-risk Hormuz imports
Traders may have to switch to different types of packaging like banana leaves if supply shortages continue.
But that is just one example of the possible impacts of the global supply crisis on Malaysia - underscoring the need for heightened awareness of its effects among policymakers, industry players and every citizen.
Seafic is a think tank dedicated to advancing economic development, international trade and investment, as well as international cooperation in the Asean region.
If the strait remains shut for another six months to a year, Mikhail said the most obvious difference a typical Malaysian family would notice is paying more for food when dining out.
This is due to disruptions in the supply of cooking gas - an item which is imported by Malaysia through the strait.
“Hawker stalls, mamak shops and small restaurants that run on commercial cooking gas cylinders could start raising prices.
“These places have no subsidy cushion, unlike the subsidised cooking gas used by households.
“When global LPG (liquefied petroleum gas) prices spike, those costs flow straight to meal prices when people eat out,” Mikhail explains.
Consumers who use cooking gas at home are directly shielded, he said, as they use the subsidised domestic cylinders.
An average Malaysian consumer may also notice a spike in fresh food prices at grocery stores or supermarkets, if industry players do not address the effects from the Hormuz closure.
“Chicken is the clearest case since feed is about 70% of the production cost, and feed prices move with the global grain and fertiliser markets - both of which Hormuz pressure pushes up.
“Vegetables follow the same logic through fertiliser costs,” adds Mikhail.
The use of plastic for packaging groceries and a host of other plastic items will also be affected.
“PET resin (a form of plastic used to package food) doubled from RM4,000 to RM8,000 a tonne in the first month of the disruption, with plastic manufacturers reporting between 15% and 40% of cost hikes,” he says.
A clear sign of the impact of plastic supply shortages was Farm Fresh’s recent switch from plastic bottles to gable-top cartons for its milk packaging in early April.
And yes, we can expect similar swaps to happen in the future.
Mikhail says such material substitutions are an early sign of broader change, rather than a one-off situation.
“It is possible for plastic packaging for liquids to be swapped with cartons.
“For beverages and cosmetics, plastic containers could be switched with those made with aluminium,” he illustrates.
As for food takeaways which use plastic, Mikhail says our “tapau” culture will not change, but the materials used to pack food will shift.
“Expect more packaging made from bagasse (fibrous material left behind after harvesting sugarcane) and kraft-paper containers at the hawker stall.
“More aluminium foil might be used by restaurants.
“The closest example to this would be like how we moved from plastic straws to paper straws.
“But this will happen fast. Businesses will need to anticipate and prepare,” he says.
On what businesses and manufacturers can do, Mikhail recommends that industry players immediately conduct an inventory audit and pre-qualify alternative suppliers.
“Qualification cycles take weeks if you start early and months if you wait, so firms that move now are the ones with stable products six months in,” he says.
Beyond that, Mikhail urges businesses to reformulate materials wherever possible.
They should also adopt a two-supplier minimum rule across origin geographies for any critical input.
Mikhail adds that the Hormuz issue is mostly a procurement-architecture problem.
“Most of the 106 products have alternative suppliers, and the cost of switching is real but bounded,” he says.
He says even if the Strait of Hormuz were to be re-opened tomorrow, the effects of the supply chain disruption could be felt for a while and recovery will take time to return to normalcy.
