The South Korean government will preemptively release public reserves of vehicle urea and urea solution to the market in response to supply chain risks stemming from the Middle East.
Finance Minister and Deputy Prime Minister Koo Yun-cheol chaired the Emergency Economic Task Force meeting via video link on Thursday while in Washington, D.C., to attend the Group of 20 (G20) finance ministers and central bank governors meeting, reviewing the response to the Middle East war.
"The Middle East war is impacting the economy through various channels, including price pressures, supply chain disruptions and financial market uncertainty," Koo said in his opening remarks. "The ability to respond to the Middle East war is now a matter of national competitiveness." He added, "We will maintain the emergency economic response system until the end of the war becomes clear and actively address supply chain and livelihood difficulties."
The meeting focused on measures to address supply chain instability. The government reported that some companies are experiencing inventory shortages of vehicle urea and urea solution and decided to release public reserves at the end of this month. While total inventories stand at a stable level of approximately three months' worth, significant differences in holdings among companies could lead to market instability.
The measure is largely preventive in nature, aimed at stabilizing the market before a supply crisis materializes. Since urea solution is essential for truck operations, any supply disruption could ripple across logistics and industry as a whole, making preemptive action necessary, officials explained.
The government is also accelerating efforts to resolve on-site corporate difficulties. A total of 78 suggestions were received through the "National Supply Chain Difficulty Hotline" between the 6th and 15th of this month. Based on these, the government has eased restrictions on adjusting public contract amounts due to rising raw material prices and swiftly implemented follow-up measures, including extending contract periods and waiving delay penalties.
The government is also reducing the burden on companies through measures such as exempting contract deposits from local tax revenue. In addition, it is pursuing measures to ease financial burdens by allowing oil refiners that import crude to defer tariff and value-added tax payments for up to nine months.
As energy prices and supply chain uncertainty expand with the prolonged Middle East war, the government will also strengthen the procurement of key resources such as crude oil and naphtha and bolster international cooperation. The response also reflects worsening external conditions, including the International Monetary Fund's (IMF) downward revision of its global economic growth outlook.
To ensure the safety of Korean vessels passing through the Strait of Hormuz, the government is operating a 24-hour technical support system that provides navigation information and plans to enhance route safety through cooperation with relevant countries. The government also plans to accelerate the execution of projects reflected in the supplementary budget to ease the livelihood burden caused by high oil prices. In particular, the government aims to execute more than 85 percent of the 10.5 trillion won budget subject to swift execution management, including high oil price damage subsidies, within the first half of the year, and will review implementation progress with relevant ministries.
