US-Iran deal may not bring quick relief for auto shops

Tokyo auto shops and Detroit car dealerships have been running short of motor oil, paint and other products for months since the Middle East conflict snarled global supply chains.

Now, while a potential deal between the U.S. and Iran may bring an end to the fighting, industry experts and executives say it is unlikely to deliver immediate relief to the smaller shops that have been squeezed by ‌Tehran’s shutdown of the Strait of Hormuz. Closure of the strait has blocked almost a fifth of global oil flows and led to bottlenecks for some petroleum-derived products.

One ⁠of the most popular colours for cars in Japan is “pearl white”, a lustrous finish made by mixing white paint with a liquid gloss. For Fuchu Car, a repair shop in suburban Tokyo, supplies of both the white paint and the pearl ​finish have become especially tight, even as other colours remain available.

The shop recently secured one 300-ml (10 oz) bottle of the pearl finish, its first batch in about two weeks, which is about how long a bottle lasts at the shop, according to ​Masato Yagai, Fuchu Car’s president.

If supplies run out, Yagai said he may have to forego painting cars that come in for repair jobs. That would allow him to still do the repairs, and avoid the disastrous option of turning away business because he couldn’t paint the vehicles.

Even without a fresh paint job, the repaired cars could still pass inspections and get back on the road, he said.

“We’d complete the painting later, once supplies return,” he said.

About a third of the roughly 160 cars he handles a month are coloured pearl white, Yagai said.

Strict storage regulations ​for materials such as motor oils make it difficult for companies to hold large amounts of petroleum-derived products.

Suzuki Motor said last month some dealers have temporarily stopped accepting new bookings for engine and brake oil changes due to supply delays.

SUPPLY DISRUPTIONS ​SPREAD

In the U.S., the conflict has disrupted supplies of raw materials used to make coatings and lubricants.

That has been a factor in the rise of lubricant prices, which are not expected to ease until at least mid-2027, according to the Independent Lubricant Manufacturers Association.

In March, ‌a Shell gas-to-liquids ⁠facility in Qatar came under attack, constraining a major Middle East producer of Group III oil, a high-grade base oil and key ingredient in synthetic oil used in vehicles.

As soon as the Shell facility was hit, “we knew right away there was going to be a big problem,” said Holly Alfano, CEO of the lubricant association.

Some automakers in the U.S. are already taking action in response to looming shortages.

Nissan Motor started implementing oil-rationing measures “to help ensure consistent supply” across its dealerships, according to a memo sent to U.S. dealers on May 20. A Nissan spokesperson told Reuters the company is “working with supplier partners to identify additional sourcing.”

U.S. car dealers are concerned about a dwindling supply of synthetic oil, a spokeswoman for the National Automobile Dealers Association said.

GET ​THE WORD OUT

In the U.S., the lubricant association is trying ​to get the word out to vehicle owners that ⁠it’s not necessary to get oil changes every 3,000 to 5,000 miles (4,800 to 8,000 km), as was the case in the past.

“The quality of the motor oil is much higher now, and it lasts longer,” Alfano said.

Japan’s Prime Minister Sanae Takaichi has said the government is boosting supplies of raw materials used in paints and thinners.

Japan’s transport ministry has begun surveying repair ​shops nationwide on supplies of engine oil, paint and other chemicals, as it tracks volumes, delivery frequency, price changes and the risk of shortages, according to the Automobile Business & ​Culture Association of Japan.

For now, at ⁠least, smaller businesses appear to be bearing the brunt.

Major paint makers likely prioritise supplies to automakers over the repair market, according to some analysts.

After the conflict erupted in the Middle East, there were cases where some customers placed larger-than-usual orders with major paint makers, although the big paint companies have been declining such requests, said Shunta Omura, an analyst at UBS.

A Japanese trade ministry official said overall supply was holding up. Still, he acknowledged that strong demand for popular colours such as white may create shortages.

Major Japanese paint producer ⁠Kansai Paint already ​produces both white paint and pearl liquid at volumes near full capacity in normal times, making it hard to raise production when orders increase, ​said Koki Chiga of Kansai’s repair paint division.

Supply of both white paint and pearl liquid had been tight at body shops previously, but has now returned to normal, he said.

One person familiar with the paint industry said buyers fear costs will rise, prompting them to buy as much as possible at ​current prices.

That has left smaller repair shops at a disadvantage, the person said.

“The larger the company, the more they stockpile,” the person said.