South Korea's government will temporarily designate naphtha as an economic security item amid supply shortages from the Middle East crisis. Finance Minister Koo Yun-cheol announced measures like securing alternative imports and restricting exports. Petrochemical firms risk operational disruptions.
Finance Minister Koo Yun-cheol stated on March 18 during a meeting of economy-related ministers that the government will temporarily designate naphtha as an economic security item due to supply shortages caused by the Strait of Hormuz blockade from Middle East tensions. South Korea imports more than half of its naphtha through the strait. This designation enables customized government support, including diversification of import markets, stockpile expansion, and substitute development. Koo said, “We will closely monitor naphtha supply trends and difficulties faced by companies, and take proactive measures, such as securing alternative import sources and restricting exports.” The government plans to expand financial support for affected companies by 1.5 trillion won ($1 billion), covering higher costs for alternative imports and preferential interest rates for high-risk items. It will swiftly deploy tools like a supplementary budget alongside the enforced oil price cap. The Ministry of Trade, Industry and Resources expects domestic petrochemical firms' stockpiles to deplete within weeks despite capacity cuts. Yeochun NCC declared force majeure on March 4, notifying ethylene supply delays. Lotte Chemical, LG Chem, and Hanwha Solutions warned clients of possible force majeure. Industry officials see Russian naphtha as the only viable alternative, which comprised nearly 30% of imports before sanctions. A Korea Chemical Industry Association official said, “The government told us it would review whether importing naphtha from Russia is possible,” but noted difficulties due to the EU's stance. Deputy PM Koo briefed President Lee Jae-myung on countermeasures.
