South Korea introduced 469.5 billion won naphtha import subsidies to deal with the impact of the Middle East supply chain.

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Recently, South Korea's Ministry of Industry, Trade and Resources officially announced that the South Korean government plans to allocate a special budget of 469.5 billion won ($0.31 billion) to subsidize the import cost of naphtha to ensure the stable operation of the domestic petrochemical industry chain, affected by the disruption of the global supply chain caused by the ongoing conflict in the Middle East.

Recently, South Korea's Ministry of Industry, Trade and Resources officially announced that the South Korean government plans to allocate a special budget of 469.5 billion won ($0.31 billion) to subsidize the import cost of naphtha to ensure the stable operation of the domestic petrochemical industry chain, affected by the disruption of the global supply chain caused by the ongoing conflict in the Middle East.

1. Core Subsidies and Budgetary Arrangements

According to the proposal issued by the Ministry of Industry, Trade and Resources, the government will provide petrochemical companies holding naphtha cracking center (NCC) units with a cost subsidy of 50% increase in the unit price of naphtha imports since the outbreak of the Middle East conflict. At the same time, the South Korean government will add an additional 158.4 billion won budget to expand the scale of national oil reserves.
The draft supplementary budget has been submitted to the Korean National Assembly for consideration. According to Yonhap News Agency, the ruling party, the Common Democratic Party, and the largest opposition party, the National Forces Party, have reached a consensus and strive to complete the budget approval process by April 10.

2. domestic supply guarantee and enterprise requirements

South Korea's Ministry of Industry, Trade and Resources promised to make every effort to ensure a stable domestic supply of petrochemical products in key areas such as medical care and core industries. The department is working with relevant ministries and commissions to continuously monitor the supply of raw materials, price trends, domestic production disruptions and tight supply and demand, and clearly requires enterprises: fully expand naphtha alternative sources and expand local production and internal supply capacity of petrochemical products..

3. export response to the Strait of Hormuz

In order to hedge the export dilemma caused by the obstruction of shipping in the Strait of Hormuz, South Korea has launched a number of simultaneous relief measures:
  • 25.5 billion won of emergency assistance to small and medium-sized enterprises;
  • provide 7.5 billion won to overseas branches and allocate 5.9 billion won to overseas joint venture logistics centers to ease the pressure on logistics costs and assist in developing alternative markets;
  • since March 27, a five-month ban on naphtha exports has been implemented, giving priority to ensuring the supply security of the domestic industrial chain.

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