South Korea is moving to contain the impact of disrupted Middle East energy exports on the domestic industry, as tighter naphtha supply raises concern for parts of the country’s shipbuilding sector.
Imported naphtha is cracked at South Korea’s petrochemical plants to produce ethylene. While accounting for only a small share of the broader market, ethylene is described as a critical input for shipbuilders because it is used to cut steel plates. Industry sources said a shortage would make it impossible for yards to continue that work.
Concern intensified after Yeochun NCC, South Korea’s largest petrochemical company, declared force majeure, citing raw material supply problems. At least three other producers, Lotte Chemical, LG Chem and Hanwha Solutions, also warned of possible supply constraints.
The Ministry of Trade, Industry and Energy held an emergency meeting on 13 March and began checking short-term ethylene demand and available inventory. It also brought shipbuilders and chemical producers together to coordinate near-term supply volumes.
On 18 March, the ministry said its earlier concern had eased, but added that work was continuing to prevent disruption in supplies of the chemicals. South Korea said it was supporting efforts to secure alternative naphtha imports through overseas diplomatic missions and trade centers.
Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul said the government was temporarily designating naphtha as an economic security item and would move proactively to secure alternative import sources. The government was also placing export restrictions.
The risk comes as South Korea’s shipbuilding industry is operating at high capacity and seeking to stay ahead of competition from China. With yards booked years in advance, any interruption to steel plate processing could have a wider effect on delivery schedules.
