South Korea’s government and petrochemical companies are moving to secure alternative naphtha supplies from Algeria, India and the United States as concerns grow that domestic stockpiles of the widely used feedstock could run out.
Industry officials said Tuesday that the government and companies have set a joint plan to check on-the-ground naphtha inventories in those countries and to contact global commodities traders including Glencore and Trafigura, aiming to bring as much available supply into South Korea as possible.
A government official said authorities are “communicating closely with companies” to build alternative supply lines and are pursuing ways to identify and secure naphtha stocks outside the Middle East.
The push follows the closure of the Strait of Hormuz after U.S. and Israeli airstrikes on Iran, a development that has hit South Korea’s petrochemical sector, which largely imports naphtha from Middle Eastern producers. Remaining domestic inventories are believed to be less than two weeks’ worth, according to the industry.
If naphtha runs out and production of basic petrochemical feedstocks such as ethylene, butadiene and aromatics stops, output of a wide range of consumer necessities derived from them would also halt, the industry warned.
About half of South Korea’s naphtha supply comes from refining imported crude oil, while the rest is imported as naphtha, mainly from the Middle East. More than half of imported volumes — 54% — are sourced from the United Arab Emirates, Qatar and Kuwait, which are inside the Strait of Hormuz, leaving supplies exposed to the closure.
As supply lines wavered, major petrochemical makers including LG Chem, Lotte Chemical, Hanwha Solutions, DL Chemical and Yeochun NCC cut naphtha cracker (NCC) operating rates to the 50% range, cited the possibility of force majeure and shifted into emergency management, the industry said.
In response, the Lee Jae-myung government decided to take a more direct role in managing naphtha rather than leaving it solely to the private sector. At a Cabinet meeting chaired by President Lee Jae-myung at the government complex in Sejong on Tuesday morning, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said disruptions were occurring in naphtha supply because of heavy reliance on the Strait of Hormuz and that the government plans to designate naphtha as an economic security item within the week.
The government is also expected to pursue steps to restrict overseas exports of naphtha refined from crude oil and prioritize domestic supply. An economic security item refers to raw materials, parts and equipment that the government manages closely because heavy dependence on specific countries and supply-chain disruptions could severely affect daily life and the national economy.
Officials and companies are said to be placing particular hopes on Algeria and India, which are major oil-producing countries believed to have relatively more naphtha on hand. They are also reviewing whether to confirm and import commercial tank naphtha stocks — mixed-origin supplies — available in the Singapore and Indonesia markets.
Lee Deok-hwan, an emeritus professor of chemistry at Sogang University, said, “Other than Algeria, India and the United States, it is difficult to find an objectively better naphtha supply chain,” adding that with the risk of a sharp drop in demand for petrochemical products due to shortages, “it is a serious crisis for the national economy, so (the public and companies) have no choice but to trust and follow the government’s active efforts.”
* This article has been translated by AI.
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