South Korea's petrochemical industry warned on April 19 that soaring raw material prices and supply instability are causing severe difficulties across operations, including production disruptions, delivery delays, and deteriorating profitability.
The Democratic Party of Korea's Euljiro Committee held a meeting titled "Naphtha Supply Meeting with Major Petrochemical Companies Amid Surging Oil Prices" at the National Assembly Members' Office Building in Yeongdeungpo-gu, Seoul. The committee heard concerns about raw material and feedstock procurement difficulties stemming from the Middle East conflict between the United States and Iran, and called for burden-sharing measures to prevent cost pass-throughs.
Industry representatives from LG Chem, Hanwha Solutions, Lotte Chemical, Yeochun NCC, the Korea Plastics Industry Cooperative Federation, and the Korea Federation of SMEs attended the meeting.
Yeochun NCC, South Korea's largest ethylene producer, declared force majeure due to the Middle East situation. The company reported that the Strait of Hormuz blockade has made naphtha procurement difficult, causing ethylene prices to surge.
"It has become extremely difficult to secure physical naphtha," a Yeochun NCC official said. "About 70% of our volume passes through the Strait of Hormuz, and with the blockade, our utilization rate has dropped significantly to minimum levels, which is deeply concerning."
"Before the Iran war, naphtha was $600 per ton, but recently we have to pay over $1,100—prices have roughly doubled, and even at that price, it's hard to obtain," the official added. "Upstream companies have no choice but to minimize their utilization rates."
An LG Chem official expressed concern: "It would have been better if the government had established a stockpiling system for naphtha, which is needed to produce ethylene—the 'rice of industry'—similar to crude oil or liquefied natural gas (LNG)." The official added, "Even after the Middle East situation ends, it will take considerable time to return to pre-war levels."
A Hanwha Solutions official said, "We don't have NCC (naphtha cracking center) facilities, so we source ethylene externally. We couldn't obtain ethylene, and just two days after the war began, our operations were shut down."
A Lotte Chemical official said the company is implementing emergency measures to prevent the naphtha supply crisis from spreading to downstream industries. "For March and April, we are trying to minimize export volumes of products like synthetic resins through contract cancellations," the official said. "Actually, export prices are better, but to stabilize the domestic chemical ecosystem, we are increasing our domestic supply ratio from the previous 45% level to 90%."
