Following Yeochun NCC, Lotte Chemical and LG Chem notified customers that "force majeure" may occur as they face disruptions in raw material supplies due to the closure of the Strait of Hormuz after U.S. and Israeli airstrikes on Iran.
Force majeure is a measure taken when, due to external factors such as war, it becomes difficult to supply products to customers on time. Declaring force majeure can exempt a company from liability for damages that may arise later from incomplete fulfillment of orders. As supply of naphtha (naphtha), the feedstock for ethylene known as the "rice of industry," as well as crude oil, is disrupted, downstream sectors such as vinyl, plastic, and apparel are also expected to be hit.
According to the petrochemical industry on the 11th, Lotte Chemical sent a notice to customers on the 10th saying that force majeure could occur. A Lotte Chemical official said, "We informed customers that force majeure could occur; it has not reached the point of a declaration," adding, "We did not say an NCC would be shut down, but notified that we might be unable to fulfill supply obligations under contracts with customers."
An LG Chem official said, "We have not declared force majeure, and only for contracts for the plasticizer product dioctyl terephthalate (DOTP) did we notify that force majeure could occur," adding, "We informed that raw material supply disruptions could arise."
Corporations that operate naphtha cracking centers (NCC; Naphtha Cracking Center) like LG Chem, Lotte Chemical, and Yeochun NCC crack naphtha, a byproduct of crude oil refining, at high temperature and pressure to produce petrochemical feedstocks such as ethylene and propylene. Ethylene is the materials and supplies for commodity petrochemical products such as polyethylene (PE) and polypropylene (PP). PE is a key raw material for vinyl, and PE is a key raw material for plastic.
A petrochemical industry official said, "If the Middle East crisis persists for a long time, in the worst case we could face a situation where plants cannot operate due to a shortage of feedstock," adding, "Ethylene has been treated as a commodity product and thus not fully valued, but in a modern society that cannot live without plastic, downstream industries such as tools, apparel, and food delivery could also be hit."