Episode 3
Korea imposes naphtha export ban, sets second-round price cap on gasoline in face of energy disruptions
This article is by Sarah Chea and read by an artificial voice. Korea is imposing a five-month ban on naphtha exports beginning at 12 a.m. Friday, in a bid to cushion energy disruptions stemming from the Iran war. To rein in surging fuel costs, the gov...
Korea JoongAng Daily - Daily News from Korea · SARAH CHEA
March 26, 20266m 43s
Show Notes
This article is by Sarah Chea and read by an artificial voice.
Korea is imposing a five-month ban on naphtha exports beginning at 12 a.m. Friday, in a bid to cushion energy disruptions stemming from the Iran war.
To rein in surging fuel costs, the government set a second-round price cap at 1,934 won ($1.3) per liter for gasoline and 1,923 won per liter for diesel — levels officials say could shave as much as 500 won off prices compared with an unregulated market.
Korea is currently mulling over raising the national resource crisis alert to "serious" — the third-highest level of the four-tier system — and is preparing to release 22.46 million barrels of strategic reserves in line with International Energy Agency agreements.
Fuel tax cuts will be extended through the end of May, while the ban on hoarding and the sales refusals for urea and diesel exhaust fluid will begin on Friday.
The measures were unveiled on Thursday at an emergency economic review meeting chaired by President Lee Jae Myung, as the prolonged war in the Middle East has effectively choked the Strait of Hormuz, disrupting flows of crude oil, liquefied natural gas (LNG) and other critical materials.
Naphtha export ban: Efficacy in doubt
Starting Friday, all naphtha exports will be restricted, with shipments permitted only in exceptional cases upon approval from the industry minister.
Refiners and downstream petrochemical firms will be required to submit daily reports detailing production, imports, usage, sales and inventories.
Often dubbed the "rice of industry," naphtha is a critical feedstock for petrochemicals used in semiconductors, automobiles and a wide array of manufacturing supply chains. Korea relies on imports for roughly 45 percent of its naphtha demand, with 77 percent of those imports sourced from the Middle East.
Affected by naphtha supply constraints, LG Chem has already halted operations at its No. 2 naphtha cracking center (NCC) in Yeosu, a facility capable of producing 800,000 tons of ethylene annually. Yeochun NCC has also suspended olefin conversion processes to recalibrate output.
As a key input for plastics and vinyl, naphtha disruptions have already triggered early signs of panic buying, including stockpiling of trash bags.
Yet the policy's impact remains uncertain as naphtha exports account for less than 10 percent of domestic refiners' output, raising questions about how much relief the curbs can deliver.
SK Innovation supplies nearly all of its naphtha to its affiliate SK geo centric, while HD Hyundai Oilbank similarly directs substantial volumes to Hyundai Chemical for domestic use.
"From March 1 to 20, naphtha exports accounted for 11 percent of domestic total production," said Yang Ki-wook, director-general of the Office of Industry, Trade and Resource Security at the Ministry of Trade, Industry and Resources on Thursday during a press briefing.
"Export restrictions alone will not fully resolve domestic shortages. But every incremental volume matters, and redirecting supply to petrochemical firms will provide meaningful support."
Separately, the government set a second fuel price cap at 1,934 won per liter for gasoline and 1,923 won for diesel, aiming to shield households from runaway energy costs. The measure takes effect at 12 a.m. Friday and remain in place for two weeks.
"Frontline gas stations must fully cooperate with the second price cap on refinery supply prices taking effect tomorrow," President Lee Jae Myung said at the meeting. "As a supplementary budget plan tied to the war response set for release next week, the priority now is flawless execution."
Fuel tax cuts deepened through May
The government will expand fuel tax cuts from March 27 through May 31, raising the reduction rate on gasoline from 7 percent to 15 percent and on diesel from 10 percent to 15 percent.
The deeper cuts will widen price relief by 65 won per liter for gasoline, and 87 won per liter for diesel, compared to current levels.
Separately, a ban on...
Korea is imposing a five-month ban on naphtha exports beginning at 12 a.m. Friday, in a bid to cushion energy disruptions stemming from the Iran war.
To rein in surging fuel costs, the government set a second-round price cap at 1,934 won ($1.3) per liter for gasoline and 1,923 won per liter for diesel — levels officials say could shave as much as 500 won off prices compared with an unregulated market.
Korea is currently mulling over raising the national resource crisis alert to "serious" — the third-highest level of the four-tier system — and is preparing to release 22.46 million barrels of strategic reserves in line with International Energy Agency agreements.
Fuel tax cuts will be extended through the end of May, while the ban on hoarding and the sales refusals for urea and diesel exhaust fluid will begin on Friday.
The measures were unveiled on Thursday at an emergency economic review meeting chaired by President Lee Jae Myung, as the prolonged war in the Middle East has effectively choked the Strait of Hormuz, disrupting flows of crude oil, liquefied natural gas (LNG) and other critical materials.
Naphtha export ban: Efficacy in doubt
Starting Friday, all naphtha exports will be restricted, with shipments permitted only in exceptional cases upon approval from the industry minister.
Refiners and downstream petrochemical firms will be required to submit daily reports detailing production, imports, usage, sales and inventories.
Often dubbed the "rice of industry," naphtha is a critical feedstock for petrochemicals used in semiconductors, automobiles and a wide array of manufacturing supply chains. Korea relies on imports for roughly 45 percent of its naphtha demand, with 77 percent of those imports sourced from the Middle East.
Affected by naphtha supply constraints, LG Chem has already halted operations at its No. 2 naphtha cracking center (NCC) in Yeosu, a facility capable of producing 800,000 tons of ethylene annually. Yeochun NCC has also suspended olefin conversion processes to recalibrate output.
As a key input for plastics and vinyl, naphtha disruptions have already triggered early signs of panic buying, including stockpiling of trash bags.
Yet the policy's impact remains uncertain as naphtha exports account for less than 10 percent of domestic refiners' output, raising questions about how much relief the curbs can deliver.
SK Innovation supplies nearly all of its naphtha to its affiliate SK geo centric, while HD Hyundai Oilbank similarly directs substantial volumes to Hyundai Chemical for domestic use.
"From March 1 to 20, naphtha exports accounted for 11 percent of domestic total production," said Yang Ki-wook, director-general of the Office of Industry, Trade and Resource Security at the Ministry of Trade, Industry and Resources on Thursday during a press briefing.
"Export restrictions alone will not fully resolve domestic shortages. But every incremental volume matters, and redirecting supply to petrochemical firms will provide meaningful support."
Separately, the government set a second fuel price cap at 1,934 won per liter for gasoline and 1,923 won for diesel, aiming to shield households from runaway energy costs. The measure takes effect at 12 a.m. Friday and remain in place for two weeks.
"Frontline gas stations must fully cooperate with the second price cap on refinery supply prices taking effect tomorrow," President Lee Jae Myung said at the meeting. "As a supplementary budget plan tied to the war response set for release next week, the priority now is flawless execution."
Fuel tax cuts deepened through May
The government will expand fuel tax cuts from March 27 through May 31, raising the reduction rate on gasoline from 7 percent to 15 percent and on diesel from 10 percent to 15 percent.
The deeper cuts will widen price relief by 65 won per liter for gasoline, and 87 won per liter for diesel, compared to current levels.
Separately, a ban on...