Minister Kim Jungkwan Warns of "Wartime-Level Crisis"... Emergency Response System for Supply Chains and Energy Activated

"Strict Response to Supply Chain Disruptions"

Kim Jung-kwan, Minister of Trade, Industry and Energy, is delivering the opening remarks at an emergency meeting with six economic organizations held at the Korean Chamber of Commerce and Industry on the 27th. Ministry of Trade, Industry and Energy.

On March 27, Kim Jungkwan, Minister of Trade, Industry and Energy, stated, "We must prepare for all possible scenarios that could escalate into a major crisis, recognizing the gravity of the situation as being equivalent to wartime." As instability in the energy and raw materials markets spreads due to the prolonged war in the Middle East, the government has begun to implement comprehensive response measures, including naphtha export controls and expanded fuel tax cuts. Accordingly, the industry is fully activating its emergency response system.

At an emergency meeting with six major economic organizations, including the Korea Chamber of Commerce and Industry, Minister Kim emphasized, "It is important for economic organizations to serve as a bridge so that our companies can proactively participate in supply chain management and energy conservation."

This meeting was convened as a follow-up to the Emergency Economic Inspection Meeting presided over by the president, aiming to strengthen public-private cooperation as the shockwaves from the Middle East spread across industries. The meeting was attended by Park Iljun, Executive Vice Chairman of the Korea Chamber of Commerce and Industry; Kim Changbum, Executive Vice Chairman of the Federation of Korean Industries; Lee Inho, Executive Vice Chairman of the Korea International Trade Association; Lee Donggeun, Executive Vice Chairman of the Korea Employers Federation; Oh Kiwoong, Executive Vice Chairman of the Korea Federation of SMEs; and Choi Jinsik, Chairman of the Korea Federation of Mid-sized Enterprises.

Minister Kim called on companies to seek alternative supply sources and strengthen inventory management. He also requested their participation in voluntary vehicle use restrictions and the expansion of flexible work arrangements as energy-saving measures. In particular, he made it clear that the government will respond firmly to any market disruptions such as collusion or hoarding. Minister Kim stated, "There have been instances where certain companies, in times of crisis, acted against the interests of the community by pursuing only their own individual profits, thereby tarnishing the reputation of all businesses. We will respond strictly to any acts of collusion, hoarding, or other behaviors that disrupt supply chains under the guise of crisis."

Additionally, Minister Kim urged the strategic use of oil reserves and stated that the government will provide full support—such as offering differential support for overseas naphtha procurement—to ensure that there are no disruptions in the production of healthcare products, key industries, and daily necessities. The government plans to release 22.46 million barrels of oil reserves, as agreed with the International Energy Agency (IEA), into the market. The timing and allocation ratios for the release are currently being discussed with domestic refiners.

The government also announced that it will enact regulations to restrict naphtha exports and stabilize supply for a period of five months. These export restrictions will apply universally, including to existing contract volumes, and will only be selectively permitted if the Minister of Trade, Industry and Energy deems it unavoidable and grants approval. Certain heavy naphtha types not used domestically may be exported as exceptions. If necessary, the government can issue production orders to refiners and prioritize supply to specific petrochemical companies, thereby directly intervening in supply-demand adjustments.

The government is also expanding the extent of fuel tax cuts to curb the pace at which rising international oil prices are transmitted to the domestic market. However, there are concerns in the market that these policies may only serve as a short-term buffer. The rise in energy prices is already affecting the entire industrial sector. The increase in naphtha prices and supply instability is having a direct impact on feedstock procurement and operating rates in the petrochemical industry. Some companies are even considering adjusting their operating rates due to increased cost burdens.

The spike in LNG prices is also putting pressure on the electricity market. Given Korea's power generation structure, which relies heavily on LNG, higher fuel costs lead directly to increased generation costs. Recently, the Northeast Asia LNG spot price index (JKM) surged to about $20 per million BTU, roughly doubling from a month ago. As electricity rates remain partially regulated, concerns have been raised that Korea Electric Power Corporation's financial burden could worsen.

The petrochemical industry is inevitably taking a hit as well. Naphtha is a core feedstock for producing basic olefins such as ethylene, and when both price increases and supply instability occur simultaneously, product spreads deteriorate and profitability can decline sharply.

In response to this complex crisis, the government is strengthening its response system. The existing "emergency task force" has been elevated to the "Middle East Situation Response Headquarters," and a constant public-private cooperation channel has been established with relevant ministries, public enterprises, and industry representatives. The government is monitoring supply-demand conditions, price trends, and industry impacts in real time and plans to consider additional countermeasures as needed.

Minister Kim stated, "The leadership of the global economy has always been reshaped in times of crisis," and added, "We will use this crisis as a springboard to seek new opportunities by pushing forward with industrial transformation through M.AX (Manufacturing AI Transformation) and regionally-driven growth without setbacks."

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