"Naphtha Temporarily Designated as Economic Security Item After Two Weeks of Supply Crisis... Government Seeks Alternative Import Sources (Comprehensive)"

The government has decided to temporarily designate naphtha, which is experiencing supply disruptions due to the closure of the Strait of Hormuz amid the Middle East crisis, as an economic security item. In addition, financial support for companies affected by the supply crisis, including naphtha, will be expanded to a total of 1.5 trillion won.

On March 18, 2026, at the Government Complex Seoul, Eugene Koo, Deputy Prime Minister and Minister of Economy and Finance, stated at the joint Emergency Economic Ministers' Meeting and Supply Chain Stabilization Committee, "With the situation in the Middle East persisting for more than two weeks, the supply chain shocks are continuing not only for petroleum products but also for raw materials, and the resulting burden is gradually accumulating across various sectors of the economy."

Deputy Prime Minister Koo explained that the government would closely monitor naphtha supply and demand trends and companies' difficulties, while also implementing proactive measures such as securing alternative import routes and imposing export restrictions.

With the Strait of Hormuz—through which more than half of the domestic naphtha imports pass—now blocked, prices have surged by 92.9% compared to January. Recently, the price has reportedly exceeded $1,000 per ton.

Yeocheon NCC, the country’s largest ethylene production base, declared “Force Majeure” due to the naphtha supply disruption on March 4 and entered an emergency management mode. Lotte Chemical, LG Chem, and Hanwha Solutions also notified the possibility of force majeure for some products, further intensifying the supply crisis for naphtha and ethylene.

It has been reported that the operational rates of major petrochemical plants in the Yeosu Industrial Complex have fallen to about half of their normal levels. The naphtha inventories held by companies are estimated to cover only about two weeks of operations, so the period from the end of this month to early next month may become a pivotal point in determining whether production disruptions will occur.

Under the "Basic Act on Supply Chain Stabilization for Economic Security (Supply Chain Stabilization Act)" enforced in June 2024, the government designates and manages more than 300 items or services that pose supply chain risks as “crisis items.” Once designated as crisis items, the government can issue emergency supply adjustment measures, including directives on the establishment, implementation, and modification of production plans, as well as instructions for supply, shipment, and the adjustment of exports and imports.

Furthermore, the government implements active stabilization measures, such as emergency procurement of crisis items, financial support for importers of crisis items, and compensation for losses incurred due to emergency supply adjustment measures. According to the first Basic Supply Chain Stabilization Plan (2025–2027), the government aims to reduce the dependence on specific countries for economic security items from 70% in 2023 to 60% by 2027, and 50% by 2030. To achieve this, fiscal and financial support exceeding 55 trillion won will be provided by 2027.

Additionally, the government will establish a “Special Support for Middle East Damage Response” within the Supply Chain Stabilization Fund and expand financial support for companies affected by supply chain disruptions to 1.5 trillion won. Companies suffering damage will receive support for the difference in alternative import costs and emergency working capital, and companies handling economic security items with high dependence on the Middle East will be eligible for preferential interest rates of up to 2.3 percentage points.

This content was produced with the assistance of AI translation services.