Middle East Unrest Fuels Crude Oil Shortage; Government Restricts Naphtha Exports

As the Iran war drags on, causing an emergency in Middle East crude oil supply, the government plans to restrict naphtha exports by domestic refiners this week. The government intends to alleviate the supply shortage by redirecting naphtha export volumes, a key raw material for petrochemical products, back to domestic use. The Ministry of Trade, Industry and Energy announced on the 24th that it is consulting with relevant ministries to review measures prohibiting naphtha hoarding and restricting exports.

Naphtha is used as a basic raw material for producing gasoline and petrochemical products such as plastics and textiles. The repercussions of the Iran war have led to supply disruptions for ethylene, polypropylene, and other products made by processing naphtha. Consequently, the impact has spread across the entire petrochemical-based materials industry, affecting the supply of ethylene gas for the shipbuilding sector, interior and exterior materials for home appliances, and food packaging materials.

LG Chem suspended operations at its Yeosu Plant 2 starting yesterday. Yeochun NCC also halted its olefin conversion process due to a decrease in the operating rate of its naphtha cracking center (NCC).

The government plans to support the additional costs of alternative imports arising from naphtha price surges through supplementary budget adjustments related to the war. The government maintains that it will consider emergency supply adjustment measures if the situation does not improve. An official from the Ministry of Trade, Industry and Energy explained that restricting naphtha export volumes and supplying them primarily to domestic petrochemical companies would help maintain operating rates.