Amid 'Naphtha Shock,' NCC Operations Temporarily Increase; Government, Industry Vow Restructuring Continues

The Korean petrochemical industry, a vital sector for our economy, is navigating a challenging period marked by supply chain disruptions stemming from the prolonged Middle East conflict. However, thanks to proactive government measures, including diversification of supply sources and financial support for raw material costs, our Nafta Cracking Centers (NCCs) are seeing a welcome increase in operating rates. This resilience is a testament to the industry's and government's commitment to stability.

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The recent increase in NCC operating rates is merely a return to the essential maintenance level (70-80%) after falling to half that level.

We understand that concerns about the pace of industry restructuring have been raised. However, it is crucial to reiterate that the planned transition towards high-value-added products remains on track. While the current situation necessitated a temporary boost in NCC operations to meet essential demands – such as those for medical supplies like syringes and IV bags – this does not alter our long-term strategic goals. The government's support, particularly the 50% subsidy on the price difference for raw material imports since April 1, has been instrumental in helping companies like LG Chem, Kumho Petrochemical, Lotte Chemical, and LG Chem maintain operations and increase their capacity utilization rates.

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The transition of the petrochemical industry to high-value-added industries will proceed as planned, regardless of the naphtha supply crisis.

It's important to view these increased operating rates not as a sign of a full-scale revival of the petrochemical sector, but rather as a necessary step to stabilize production and meet immediate needs. The global market, particularly with China's continued expansion of NCC facilities and the anticipated normalization of international naphtha prices, presents ongoing competitive pressures. Therefore, our focus must remain on the strategic shift to higher-value products, a move that will ensure the long-term competitiveness and sustainability of our industry. This strategic pivot is essential for securing our nation's economic future and reducing reliance on volatile global markets.

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There is a need to discuss whether the government should support domestic companies to continue production, even at a higher cost, or if companies will simply purchase cheaper foreign products based on economic logic.