With the Middle East war disrupting domestic naphtha supply and demand, naphtha exports will be fully controlled starting at 12 a.m. on the 27th.
The Ministry of Trade, Industry and Resources announced it would promulgate the Regulation on Naphtha Export Restrictions and Supply Stabilization and enforce it for five months.
Naphtha is a key raw material for producing semiconductors, automobiles, and pharmaceutical materials, and 45% of domestic demand depends on imports. With Middle Eastern supply accounting for 77%, it is a category directly hit by the war.
In principle, the export restriction applies to all naphtha volumes, but it does not apply to some heavy naphtha not used in domestic petrochemical facilities. Otherwise, exports are exceptionally allowed only when deemed unavoidable after review by the Minister of the Ministry of Trade and Industry (MOTI). Already contracted volumes are not exempt.
Violations are subject to imprisonment of up to two years or a fine of up to 50 million won under the Petroleum and Petroleum Alternative Fuel Business Act. The government plans to prepare measures to compensate refiners for losses caused by export restrictions on pre-existing contracts.
With this measure, about 11% of domestic naphtha production that had been exported overseas (based on last year) is expected to be supplied first to the domestic petrochemical industry. However, some note that the export volumes may lack the product qualities needed for domestic use, limiting the effect. In response, the government said it would pursue additional measures.
In addition, refiners and petrochemical corporations must henceforth report naphtha production, import, use, sales, and inventories to the Ministry of Trade and Industry (MOTI) on a daily basis. To prevent hoarding, if it is determined that the weekly naphtha outbound ratio has fallen by 20% or more compared with the previous year, the Minister can order sales and inventory adjustments. The authority to adjust supply and demand, including directing priority supply to specific petrochemical corporations, may also be invoked.
The government plans to lift the regulation early once supply instability eases.
Kim Jung-kwan, Minister of the Ministry of Trade and Industry (MOTI), said, "Please cooperate so that naphtha-related petrochemical products can be distributed and managed in a way that aligns with the purpose of the newly established notice," adding, "The government will prioritize supplying naphtha to ensure there is no impact on the production of healthcare, key industries, and daily necessities."