For South Korea, the energy shock triggered by the escalating situation in the Middle East-occurring thousands of miles away-continues to persist.
According to data from South Korea's Ministry of Trade, Industry and Energy, effective midnight on the 27th, the country has implemented a comprehensive ban on naphtha exports. This measure aims to alleviate the tight domestic supply of naphtha, with the restriction currently set to remain in place for a period of five months.
Naphtha, a term differing from "petroleum" by just a single character, is a light oil fraction derived from the refining of crude oil. Widely utilized across the industrial sector-earning it the moniker "the industrial rice"-it serves as a key feedstock for producing basic petrochemicals such as ethylene and propylene. These chemicals are essential for manufacturing a wide range of products, including plastic packaging and construction materials, and are also critical inputs for industries such as semiconductors and automotive manufacturing. According to data from S&P Global Energy, naphtha prices have skyrocketed by over 50% since last month.
As one of the world's largest importers of naphtha, South Korea has been hit hard by this shortage of raw materials. The supply crunch has compelled LG Chem-the country's largest petrochemical enterprise-to make the difficult decision last week to suspend operations at certain production units within its core plant complex in Yeosu.
Following the ban on naphtha exports, the Ministry of Trade, Industry and Energy further indicated that, in light of the Middle East situation's impact on energy supplies, the South Korean government is currently evaluating proposals to impose export restrictions on other petrochemical products. The government pledged to closely monitor the evolving situation and make a final determination only after a comprehensive assessment of the circumstances.
Last week, a wave of "panic buying" for garbage bags swept across South Korea, drawing significant public attention. Driven by fears regarding the ripple effects of supply chain pressures, shortages of standard-issue garbage bags began to emerge in various regions across the country. Convenience store employees reported that bags of common sizes had been completely snapped up, yet customers continued to stream into stores, inquiring about restocking schedules. Concurrently, consumer anxiety spread rapidly across social media platforms; consequently, some members of the public began hoarding garbage bags-a reaction that further exacerbated the atmosphere of market tension.
In response, the South Korean government emphasized that current inventory levels remain ample and that there is absolutely no need for the public to engage in hoarding. An investigation conducted by the Ministry of Environment (which oversees climate and energy affairs) revealed that, on average, the current garbage bag reserves held by South Korea's 228 local governments are sufficient to last for three months. Furthermore, 123 of these local jurisdictions possess reserves capable of meeting demand for over six months. When factoring in the production output from recycling enterprises, the country's overall supply chain could sustain production for approximately one year, even in the event of a complete cutoff of raw material imports.
This recent wave of "garbage bag panic buying" in South Korea serves as a microcosm of the "butterfly effect"-the far-reaching global market repercussions triggered by the escalating geopolitical situation in the Middle East. According to estimates by the South Korean industrial sector, if the government fails to take action, the country's naphtha reserves will be sufficient to last for only about two weeks. A survey conducted by the Korea Plastic Industry Association revealed that among 37 respondent companies, 71% had received notifications from upstream suppliers regarding reduced or suspended deliveries of raw materials, while 92% were informed that raw material prices would increase.
Data from the International Energy Agency indicates that South Korea-Asia's largest naphtha importer-relies on imports for approximately 45% of its annual naphtha consumption, with imports from the Middle East accounting for a staggering 77% of that total. According to data from the Korea National Oil Corporation, South Korea imported 238 million barrels of naphtha last year. Of this volume, approximately 24% originated from the United Arab Emirates (UAE) and about 13% from Qatar. Consequently, the current disruption in naphtha supplies from the UAE and Qatar is having a particularly significant impact on South Korea.
On March 20, the South Korean government decided to designate naphtha as a "critical commodity" in an effort to mitigate the potential impact of disrupted naphtha imports from the Middle East on downstream industrial operations. On March 27, the government further tightened its related regulatory policies. Under the new regulations, the export of all domestically produced naphtha is strictly prohibited-including shipments covered by pre-existing export contracts-with the sole exception being cases explicitly approved by the Minister of Trade, Industry and Energy. The Ministry stated that approximately 11% of domestically produced naphtha is currently allocated for export; under the new rules, this entire volume will be diverted to meet domestic market demand.
South Korean Minister of Trade, Industry and Energy Kim Jung-kwan emphasized that naphtha serves as a fundamental raw material underpinning the nation's industrial development. He pledged that the government would spare no effort to ensure supply stability-including by increasing imports from overseas sources-in order to address current supply-and-demand imbalances. He further stated that priority would be given to securing naphtha supplies essential for the healthcare sector, critical industries, and the production of daily necessities.