The government decided to implement an "emergency supply adjustment" measure this week for "basic petrochemical feedstocks," the materials used to make plastic film and packaging.

Yang Ki-uk, Deputy Minister for Industrial Resource Security at the Ministry of Trade, Industry and Resources, held a briefing on the Middle East situation at the Sejong Government Complex on the 14th and said, "We plan to implement a ban on hoarding and an emergency supply adjustment order this week targeting ethylene, propylene, butadiene, and BTX (benzene, toluene, xylene)."

Yang Ki-uk, director-general for industrial resource security at the Ministry of Trade, Industry and Resources, gives a briefing on domestic oil and gas price trends, impacts on major industries, and responses related to the Middle East war at the Ministry of Trade and Industry (MOTI) press room in the Government Sejong Complex in the morning on the 31st last month. /Courtesy of Ministry of Trade, Industry and Resources

The supply adjustment management targets are seven types of basic feedstocks, including ethylene, propylene, butadiene, and BTX. These are obtained by high-temperature cracking of naphtha and, when reprocessed, become plastic film and packaging.

However, downstream products such as PP and PE made using basic feedstocks were excluded from the supply adjustment measures. Deputy Minister Yang said, "We judged it would be difficult to manage measures extending to derivative products," adding, "However, if disruptions to the supply of medical supplies or daily necessities are a concern, they will be additionally included in the management scope."

Once the emergency supply adjustment notice takes effect after presidential approval, as with naphtha, which was previously placed under an emergency supply adjustment order, corporations must report production, shipments, and inventory levels of the relevant items to the government. Based on this information, the government can issue orders for production, supply, and shipments to operators. If deemed necessary, the government plans to intervene in the market to ensure basic feedstocks are directed to health care, daily necessities, and key industries.

Meanwhile, the Ministry of Trade and Industry (MOTI) decided to invest a supplementary budget of 674.4 billion won in the "naphtha supply stability support program," which subsidizes the increase in naphtha import unit costs. It will be applied retroactively to imports from the 1st of this month. Based on this, the government plans to raise the operating rate of domestic naphtha cracking centers (NCC), which once fell to 55%, to 70%, the level before the Hormuz situation.

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