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Iran War Impacts Ethylene Supply, Government Prepares Emergency Measures for Oil Supply
Iran War Causes Ethylene Supply Shortages and Price Hikes
The Iran War has led to a significant drop in ethylene supply for the petrochemical industry, resulting in a nearly 20% price increase. Ethylene is considered the "rice" of the petrochemical industry, being a crucial raw material for various sectors including plastics, vinyl, and automotive components. While plastic manufacturing companies typically maintain a ten-day inventory, they currently only have a 2-3 day supply. Lee Jae-hyung, Vice Chairman of the Korea Plastic Packaging Association, anticipates that normal ethylene supply will become difficult from April, with prices expected to rise by 50-60%.
Strait of Hormuz Blockade Disrupts Naphtha Supply, Affecting All Industries
The ethylene supply disruption is primarily due to difficulties in importing naphtha, its raw material, caused by the blockade of the Strait of Hormuz. Naphtha is produced during the crude oil refining process and then converted into ethylene in naphtha cracking facilities. Domestic naphtha supply consists of 40% domestic production and 60% foreign imports. With 70% of Middle Eastern crude oil imports blocked, domestic production is hampered, and 54% of naphtha imports also come from the Middle East, leading to severe supply issues. The shipbuilding industry is also reporting a shortage of cutting-grade ethylene, essential for ship construction, indicating a ripple effect across all industries.
Government Raises Oil Crisis Alert and Secures Alternative Import Sources
The government has assessed the oil supply crisis as a reality and elevated the oil crisis alert to Level 2 'Caution'. Kang Hoon-sik, Chief of Staff to the President, announced that the United Arab Emirates (UAE) has promised priority crude oil supply, leading to an additional 18 million barrels of crude oil being imported. This includes 6 million barrels transported by three UAE-flagged vessels and an additional 12 million barrels via six South Korean-flagged vessels. Furthermore, naphtha has been temporarily designated as an economic security item, and measures such as securing alternative import channels and restricting exports will be implemented. The government also plans to announce a plan to release 22 million barrels of government strategic oil reserves this week.
*Source: YouTube: SBS News (2026-03-18)*
