Shipbuilders' Gas Supply Crisis Deepens Amid Naphtha Shortage Fallout

Domestic petrochemical production has significantly decreased due to difficulties in securing naphtha (a petrochemical feedstock), which relies on imports. This has led to a crisis where gas supply, essential for steel plate cutting in the shipbuilding industry's core processes, is now facing shortages.

The characteristic supply chain for South Korea's heavy and chemical industries involves petrochemical facilities (NCCs) that use imported naphtha to produce ethylene mixed gas, which is then supplied to shipyards for steel plate cutting. However, due to the current naphtha shortage, NCC operating rates have fallen below 40%. As domestic NCC production has dropped to less than 40% of its usual capacity due to the halt in naphtha deliveries, gas production for steel cutting at shipyards has also plummeted by over 75%.

Currently, the gas inventory held by the three major shipbuilding companies has reached a critical point, with only 14 days of supply remaining, raising concerns about disruptions in shipbuilding processes. In response, the Ministry of Trade, Industry and Energy will hold the 3rd Shipbuilding-Petrochemical Synergy Supply Chain Review Meeting on May 14 to finalize emergency supply and demand measures. The government is reviewing the invocation of emergency naphtha supply adjustment rights under the Price Stabilization Act and has completed legal review for the enforcement of this measure, which would compel refiners to allocate their naphtha inventories to petrochemical companies. This is a measure similar to the urea solution supply crisis in 2021.