LG Chem Halts Operations at Yeosu Plant 2 Amid Naphtha Supply Crisis

Emergency Over Raw Material Supply Amid Middle East Unrest
Concerns Grow Over Widespread Shutdowns in the Petrochemical Industry

As geopolitical risks originating from the Middle East escalate, concerns over raw material supply instability in the domestic petrochemical industry are becoming a reality. With ongoing disruptions in securing naphtha, key companies have begun to scale back production, and it has been confirmed that LG Chem has also halted operations at some of its facilities.

Exterior view of LG Chem Yeosu Plant.

According to the petrochemical industry on March 23, LG Chem has gradually reduced operations at its production lines within the Yeosu National Industrial Complex in South Jeolla Province, and reportedly shut down some of its plants earlier this week. The Yeosu complex consists of Plant 1, with an annual capacity of 1.2 million tons, and Plant 2, with a capacity of 800,000 tons. The shutdown reportedly affects Plant 2. Although Plant 2 is a relatively recent addition, it is smaller in scale than Plant 1, and the decision to halt its operations is seen as a strategic move to minimize overall production disruption.

This measure is not simply a response to declining profitability, but rather to the growing difficulty of securing raw materials themselves. Since tensions in the Middle East intensified, naphtha prices have surged past $1,100 per ton—nearly doubling from a month ago. However, industry experts note that the issue of securing supply is more critical than the price itself, as it typically takes about 20 days for shipments from the Middle East to reach Korea. Recently, the flow of new supplies has virtually come to a halt, leading to a rapid depletion of inventories.

As a result, major petrochemical companies have responded by lowering operating rates below breakeven levels or bringing forward scheduled maintenance, but analysis suggests they are now reaching the limits of their ability to endure the situation. Some companies have even alerted clients in advance about the potential for production disruptions, taking their response a step further.

Industry insiders see the period from the end of this month through the middle of next month as a critical juncture. If additional raw materials cannot be secured, there is widespread expectation that shutdowns will rapidly spread throughout large petrochemical complexes. One industry official stated, "Most companies are already operating their plants at minimum levels. If the situation in the Middle East becomes prolonged, widespread shutdowns will be inevitable."

Disruptions in the supply of petrochemical products are also raising concerns about ripple effects on downstream industries that rely on basic materials such as plastics and synthetic resins, including the automotive, electronics, and packaging sectors.

The government has also taken action. It has raised the resource security crisis alert to "caution," designated naphtha as an economic security item, and begun managing its supply. Authorities are also working with the industry to secure alternative supplies and are reviewing emergency import support measures. Industry players are reportedly exploring various alternative sourcing solutions, such as importing Russian naphtha, to reduce dependence on the Middle East.

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