Yeocheon NCC, which declared force majeure after disruptions in raw-material supplies linked to U.S. and Israeli strikes on Iran, may halt its butadiene (BD) production facilities at its Yeosu No. 2 plant, industry sources said. With the Strait of Hormuz blocked and Middle East naphtha supplies disrupted, the company is expected to suspend output first for products with weaker customer demand. The move could push already strained operating rates — which had fallen below 70% due to supply uncertainty — down into the 50% range, heightening concerns across the Yeosu industrial complex.
Industry officials said Tuesday that Yeocheon NCC began cutting naphtha feedstock input last week to lower the operating rate at its BD2 plant. Some in the industry say the company could gradually reduce feedstock further and ultimately suspend the facility temporarily.
The review reflects difficulties securing naphtha from Middle Eastern countries such as the United Arab Emirates amid the war involving Iran, the officials said. South Korean petrochemical companies typically source about half of their naphtha from domestic refiners and import the rest from the Middle East and elsewhere. Companies with vertically integrated refining and petrochemical operations can draw on crude inventories to better withstand supply disruptions from the Hormuz blockade, but firms focused solely on petrochemicals face immediate constraints on producing basic petrochemical feedstocks such as ethylene.
Yeocheon NCC was established as a 50-50 venture between Hanwha Solutions and DL Chemical to refine basic feedstocks used to make petrochemical products including ethylene, aromatics and butadiene. It supplies most of its output to Hanwha Solutions and DL Chemical, while exporting some to Germany’s BASF and other customers. The force majeure notice was sent to BASF, and the disclosure is said to have leaked through foreign media reports.
Petrochemical industry officials warn that naphtha shortages could lead companies at South Korea’s three major petrochemical complexes to suspend operations or sharply cut run rates, starting with Yeocheon NCC. If the war drags on, they said, companies already suffering prolonged losses from structural downturn conditions tied to oversupply from China and the Middle East could see sales and customer networks erode further.
Yeocheon NCC is also under pressure to produce a voluntary cutback plan for its naphtha cracking center (NCC), as requested by the government and creditors, industry officials said. The Ministry of Trade, Industry and Energy and creditor groups led by the Korea Development Bank have asked petrochemical companies in the Yeosu complex — including Hanwha Solutions, DL Chemical, Lotte Chemical, GS Caltex and LG Chem — to submit voluntary reduction plans by no later than the end of March, the officials said.
Lee Deok-hwan, an emeritus professor of chemistry at Sogang University, said diversifying crude oil and naphtha supply chains is difficult. “Because of U.N. sanctions, imports from Russia are impossible, and most Canadian supplies are already pre-purchased,” he said. “The crisis in the refining and petrochemical industries caused by the war involving Iran is only beginning, and the situation is very serious. Government authorities need to recognize that.”
A Yeocheon NCC official said, “As of now, there are no plans to shut down the BD2 plant.”
A Yeocheon NCC official said, “As of now, there are no plans to shut down the BD2 plant.”
* This article has been translated by AI.
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