South Korea Bans Hoarding of 7 Key Petrochemical Raw Materials Amid Supply Woes

In response to prolonged supply chain disruptions affecting naphtha, the South Korean government has taken a decisive step by designating seven key petrochemical raw materials, including ethylene and propylene, as subject to a hoarding ban. This regulatory measure, implemented under the 'Regulations on Prohibition of Hoarding and Emergency Supply Adjustment of Raw Materials for Petrochemical Products,' signals a strengthening of the government's oversight of the petrochemical supply chain, following earlier actions like naphtha export controls.

The seven designated basic fractions are ethylene, propylene, butadiene, benzene, toluene, xylene, and other fractions. These are fundamental building blocks for a vast array of products. Ethylene, for instance, is essential for producing vinyl and packaging plastics, as well as styrofoam. Propylene serves as a raw material for electronic containers and packaging films. The new regulation prohibits businesses from holding inventory levels exceeding 80% of the previous year's same period, aiming to prevent artificial shortages and price gouging.

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We will closely monitor the supply and demand situation of petrochemical products and proactively manage factors causing instability to minimize the impact on people's lives and prices.

Furthermore, the government has indicated its readiness to expand the scope of this control. If specific intermediate or final products derived from these basic fractions are identified as facing supply shortages, they can be added to the list of controlled items after consultation among relevant ministries. This includes materials like PE and PP, as well as medical items such as IV bags and packaging containers, which, while currently excluded, could be brought under management if supply concerns escalate.

Should supply instability continue despite these measures, the government possesses the authority to implement emergency adjustments to production, shipment, and sales volumes. The plan prioritizes interventions for items critical to public life, health, essential goods, national defense, security, and key industries. To mitigate the financial burden on businesses, the government has pledged to compensate for any losses incurred due to these supply adjustment orders, in accordance with relevant laws. The measure is set to remain in effect until June 30, with Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, emphasizing the government's commitment to closely monitoring the petrochemical market and proactively managing potential disruptions to minimize impacts on public life and prices. Minister of Trade, Industry and Energy, Kim Jeong-kwan, further elaborated that this initiative goes beyond individual item management to encompass a more comprehensive oversight of the entire petrochemical supply chain, including efforts to maximize naphtha supply through import cost subsidies.

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This measure goes beyond responding to individual items like naphtha to managing the entire petrochemical supply chain more meticulously. We will maximize naphtha supply through subsidies on import cost differences.