South Korea to increase naphtha and condensate procurement through multiple channels to stabilize petrochemical raw material supply

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In order to ensure a stable supply of raw materials for the domestic petrochemical industry, the Korean government and local refiners are expanding the scale of naphtha and condensate procurement through multiple channels to cope with the current risk of supply chain fluctuations.

In order to ensure a stable supply of raw materials for the domestic petrochemical industry, the Korean government and local refiners are expanding the scale of naphtha and condensate procurement through multiple channels to cope with the current risk of supply chain fluctuations.

Government-led procurement: opening up non-Hormuz routes

After visiting four countries in Central Asia and the Middle East as special envoy for strategic and economic cooperation, South Korean President's Chief Secretary Kang Xun-sik has finalized the import quota of 2.1 million tons of naphtha to be delivered throughout the year. This batch of goods comes from Kazakhstan, Oman, Saudi Arabia, and Qatar. The transportation route avoids the Strait of Hormuz, which can avoid the risk of channel blockade. It has arrived in batches since the end of April and is all used for the production of petrochemical products. South Korea's Ministry of Industry said that the current supply of raw materials under pressure, will give priority to the protection of medical, daily chemical downstream products of raw materials supply, reduce the impact of supply chain fluctuations on people's livelihood.

Enterprise market procurement: Condensate oil prices rose sharply

Private oil refining and petrochemical enterprises in South Korea actively purchase condensate for the production of self-produced naphtha. Data show that enterprises in South Korea's Dashan region purchase Australian condensate at high prices, and large refineries in Ulsan have also finalized a large number of orders for Australian condensate, with a significant increase in premium. Driven by demand, the monthly price of Australian condensate rose by nearly 40%, while the spot spread of domestic naphtha in South Korea rose simultaneously. The expansion of raw material supply will stabilize the operating rate of ethylene cracking units and mitigate the risk of production reduction.

Financial subsidy support: reducing the pressure of import cost

On the financial front, the South Korean government added 674.4 billion won (about US $0.459 billion) to supplement the budget to support naphtha imports. The subsidy will cover half of the cost of the import contract spread in April-June, and the scope of support includes naphtha, condensate, liquefied petroleum gas and basic chemicals such as ethylene and propylene, so as to efficiently cope with the tight supply and demand of short-term raw materials.

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