After U.S. and Israeli airstrikes on Iran disrupted naphtha supply in the petrochemical industry, LG Chem succeeded in importing Russian naphtha. The result comes as the United States temporarily eased sanctions on Russian crude and naphtha for one month, marking the first case in which the government and private corporations worked together to secure a supply chain to replace Middle Eastern naphtha.
According to the Ministry of Trade, Industry and Resources and the industry on the 30th, 27,000 tons (t) of Russian naphtha secured by LG Chem will arrive in Korea that day. The shipment had been waiting at sea since Western sanctions on Russia, and LG Chem was said to have recently signed an import contract for the naphtha through a Russian intermediary dealer. The naphtha was reportedly heading into the Daesan Petrochemical Complex in South Chungcheong that day.
The Russian naphtha arriving this time is small compared with Korea's average monthly naphtha consumption (about 4 million tons). The industry views it as enough to cover about three to four days of use amid reduced operating rates.
The transaction was made as the United States eased export controls on Russian crude and naphtha for a month. The Donald Trump administration said on the 12th (local time) that it would temporarily lift sanctions on Russian crude at sea. Accordingly, sales of crude and petroleum products loaded on vessels were approved through Apr. 11.
The government confirmed with the U.S. Treasury Department that secondary sanctions would not apply to Russian petroleum products and that settlement could be made in non-dollar currencies such as the ruble and the yuan, enabling the transaction. However, completing the contract, payment, and shipping by Apr. 11 remains an obstacle. An industry official said, "We cannot be sure there will be no special measures when exporting products made with Russian naphtha to the European Union (EU)."
Petrochemical companies in Korea needed 59 million tons of naphtha last year, of which 45% (26 million tons) was imported for use. Since 54% of imported naphtha is transported through the Strait of Hormuz, 25% (14.37 million tons) of Korea's required naphtha is within the impact zone of the Middle East situation, raising concerns about supply disruptions.