The government will push for a mandatory reporting system for production and import volumes to respond to instability in naphtha supply caused by the prolonged Middle East crisis. The aim is for the government to directly grasp supply and demand flows to prevent hoarding and maintain operating rates in Korea's petrochemical industry.
Yang Gi-uk, Deputy Minister for Industrial Resource Security at the Ministry of Trade, Industry and Resources, said at a briefing by the Middle East Situation Response Headquarters on the 24th that the government is preparing a "naphtha emergency supply and demand adjustment plan" centered on these measures. Yang said, "We are consulting with relevant ministries and will announce the plan as soon as administrative procedures, such as a public notice, are completed," adding, "We are aiming to make the announcement this week."
Once the mandatory reporting system is introduced, companies that produce or import naphtha must report their production and shipment volumes to the Ministry of Trade and Industry (MOTI). Based on this, the government will have the legal grounds to crack down on hoarding. If caught, penalties could include up to "business registration cancellation," according to MOTI.
Export restrictions will also be implemented. The plan is to block refiners from exporting naphtha overseas and redirect supplies to petrochemical companies. The Deputy Minister said, "Export volumes are not very large, but if we restrict them and redirect to petrochemical corporations, it will help maintain operating rates."
At the same time, the government will support alternative imports. The Deputy Minister said, "We have applied to reflect in the supplementary budget support for the difference in costs that arises when importing naphtha through channels other than existing routes."
The move comes as domestic naphtha inventories have become tight. With imports delayed due to tensions in the Strait of Hormuz, the propylene plant (OCU) at the Yeocheon naphtha cracking center (NCC) has halted operations, and LG Chem's Yeosu Plant 2 ethylene NCC has also stopped.
MOTI expects that 18 million barrels of crude oil to be imported from the United Arab Emirates (UAE) will begin its first arrival around Apr. 10 and then come in sequentially, and judges the domestic supply and demand safety margin to last until late April to early May.
The government is also closely watching because disruptions in naphtha supply could spill over into the supply and demand of polypropylene (PP), used as interior materials in washing machines and home appliances, and high value-added synthetic resin (ABS), used as exterior materials.
Park Dong-il, head of industrial policy, said, "We are identifying industry-by-industry demand and inventory status for key items that are essential industrial materials and directly linked to people's daily lives through individual outreach," adding, "So far, most have secured a certain level of inventory." He added, "We will work with the petrochemical industry and corporations in supply chains across each sector to ensure supply and demand difficulties are alleviated as much as possible."