FM Cho vows efforts to secure alternative naphtha supply routes amid Mideast crisis

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South Korea is implementing a multi-pronged strategy to stabilize its naphtha supply chain as the U.S.-Iran conflict continues to disrupt shipments through the Strait of Hormuz. According to the foreign ministry, Foreign Minister Cho Hyun has vowed to use all available diplomatic resources to secure alternative import routes, while industry data shows a significant shift toward U.S. supplies. Financial regulators have also stepped in to support major petrochemical producers.

Government and Industry Coordination

Foreign Minister Cho Hyun met with officials from major local oil refiners and petrochemical companies in April to address supply disruptions. According to the foreign ministry, Cho met with members of the Korea Petroleum Association—including SK Energy Co., GS Caltex Corp., S-Oil Corp., and HD Hyundai Oilbank Co.—on April 10, and later with petrochemical industry officials at the Korea Chemical Industry Association on April 17. In both meetings, industry representatives proposed that the government provide diplomatic support in securing alternative oil and naphtha supplies, share real-time information on oil market regulations in major countries, and work to allow Korean ships to pass through the Strait of Hormuz.

Cho responded by saying that overseas diplomatic missions are making all-out efforts to secure alternative supplies in cooperation with host countries, and that work is under way with prospective suppliers to secure oil exports, according to the ministry.

Shift in Naphtha Imports

The Ministry of Trade, Industry and Resources reported that the United States has become the largest exporter of naphtha to South Korea since the outbreak of the Iran conflict. The ministry said South Korea currently imports 24.7 percent of its naphtha from the U.S., followed by India at 23.2 percent, Algeria at 14.5 percent, the UAE at 10.2 percent, and Greece at 4.5 percent. Before the war broke out in late February, the U.S. ranked seventh, with the UAE in the top spot.

Deputy Minister for Trade, Industry and Resource Security Yang Ghi-wuk said the U.S. emerged as the largest source because it was easier to secure supplies from that country in terms of availability. However, Yang cautioned that it is still too early to determine whether this represents a fundamental shift in the supply chain, as the naphtha market is highly sensitive to prices.

The ministry also said South Korea is expected to secure up to 90 percent of its pre-Iran war naphtha supplies for May. Yang noted that the equivalent volume of naphtha contracts signed over the entire month of March was matched within just half a month in April, and that Seoul has been importing a significant amount of basic petrochemical feedstock from China.

Financial and Regulatory Support

To further stabilize supplies, the government has taken financial and regulatory steps. According to the Financial Services Commission (FSC), creditors of Yeochun NCC—a major producer of ethylene products—decided to raise the company's letter of credit (L/C) limit to $300 million. Yeochun NCC had asked its main creditor, Korea Development Bank, to raise the L/C last month. The Korea Trade Insurance Corp. will provide $50 million worth of import insurance, the FSC said.

Earlier, in April, the government announced it would inject about 670 billion won (US$457 million) to cover up to 50 percent of the difference between pre-war prices and increased import prices of naphtha for the April-June period, according to the industry ministry.

The government also imposed a ban on hoarding petroleum-based raw materials and products on April 15, and announced plans to fully subsidize additional freight costs incurred when sourcing supplies from outside the Middle East, as reported by the Korea Chemical Industry Association (KCIA).

Industry Commitment

The Korea Chemical Industry Association issued a joint statement on April 20, with 33 major member companies pledging to cooperate with the government to stabilize supply chains. Companies including LG Chem, Kumho Petrochemical, Lotte Chemical, Hanwha Solutions, and SK Geo Centric said they would prioritize securing sufficient volumes to maintain plant operating rates. A KCIA official said the industry will continue to fulfill its role as a key pillar of the national economy and daily life.

Outlook and Remaining Challenges

The country has secured 2.1 million tons of naphtha by the end of this year from four Middle Eastern nations, including Oman and Saudi Arabia, which is equivalent to about a month's supply based on last year's demand, according to the industry ministry. However, the Strait of Hormuz remains a concern for South Korean vessels, and the government has not yet announced a timeline for resuming normal passage.

The full impact of these measures on naphtha prices and supply stability is still unfolding, and officials caution that the situation remains fluid.