Taiwan Tops South Korea's Naphtha Imports

According to data from the Korea International Trade Association on Sept. 28, South Korea imported 134,473t of naphtha from Taiwan last month. This was greater than the amounts brought in from oil-producing countries such as Kuwait (127,997t), the United Arab Emirates (108,992t), and Algeria (37,810t). There was no import volume of Taiwanese naphtha until the first half of this year, however 65,238t were brought in in July, and the amount increased significantly last month. It is reported that the volume in question was imported by LG Chem, Lotte Chemical, and others.

The reality facing the Taiwanese petrochemical sector lies behind the background of Taiwanese naphtha import volume reaching a surprise first place. Taiwan has a similar manufacturing structure to South Korea. substantial conglomerates such as Formosa and CPC Corporation import and refine crude oil, and sell petroleum items such as gasoline and diesel. The naphtha produced during the refining process is fed into the NCC to make basic petrochemicals such as ethylene and naphthalene. They share the commonality of managing refining facilities and NCCs together as a single unit.

Following the outbreak of the Middle East war in February, Taiwan experienced difficulties in the supply and demand of crude oil and naphtha, just like South Korea. A so-called ‘vinyl crisis’ also occurred. However, it has currently found stability through the diversification of import sources and renewable energy policies.

The issue is that low-priced general-purpose Chinese items have started to flood the market again. Taiwanese companies, losing out in price competitiveness with China, drastically lowered their NCC operation rates. In the case of Formosa, it suspended the operation of an NCC with an annual capacity of 1,200,000t based on ethylene. This means that the naphtha produced through crude oil refining has lost its place to be applied.

An sector official explained, “They could not pile up the naphtha, so they disposed of it overseas to countries like South Korea.” From the perspective of domestic petrochemical companies, it became an opportunity to purchase Taiwanese naphtha that came onto the market at a low price. It also incurs reduce transportation costs compared to naphtha imports from the Middle East, North Africa, and North America. The fact that it is a suitable grade to domestic NCCs also played a role.

Taiwan’s naphtha ‘bargain sale’ provides implications to the domestic petrochemical sector as well. The logic is that while the government is waging an all-out effort on naphtha supply and demand due to the prolonged Middle East crisis, general-purpose Chinese items have already begun flowing back into the country, and when the situation calms down, South Korea could fall into the same dilemma as Taiwan over how to utilize naphtha.

A government official said, “Taiwan built larger-scale NCCs than South Korea and made aggressive investments, however it is currently in a dilemma.” Ultimately, arguments are being raised that the excess fat of NCCs must be trimmed through the restructuring of petrochemical manufacturing complexes. The Ministry of Trade, sector and Energy approved the final draft of the petrochemical business reorganization plan to the Yeosu manufacturing Complex in July, however the Ulsan manufacturing Complex remains at a standstill.

sector efforts to develop high value-added items are also continuing. LG Chem announced on Sept. 28 that it recently signed a memorandum of understanding (MOU) with Volkswagen Group to the ‘research and expanded consumption of next-generation and eco-friendly mobility materials.’ The two companies agreed to strive to vehicle lightweighting and performance improvement by utilizing LG Chem’s high value-added synthetic resin (ABS) and engineering plastics (EP).