Alphabiz - Supply Chain Risks Mount in South Korea as Middle East Conflict Enters Fourth Week

Photo courtesy of Yonhap News

[Alpha Biz= Kim Jisun] South Korea’s industrial sector is facing mounting supply chain risks as the conflict involving the United States, Israel, and Iran enters its fourth week, raising concerns that shutdowns in the petrochemical sector could spread across key industries.

According to industry sources on March 23, LG Chem has halted operations at its No. 2 naphtha cracking center (NCC) in Yeosu starting the same day, citing difficulties in securing feedstock naphtha. The Yeosu complex operates two plants with annual production capacities of 1.2 million tons and 800,000 tons, respectively, with the second facility being the first to suspend operations.

Industry experts warn that if the Middle East situation persists, additional large-scale plant shutdowns may be inevitable. Ethylene, produced through naphtha cracking, is a fundamental raw material widely used in plastics, synthetic resins, and coatings, and is often referred to as the “rice of industry” due to its critical role across sectors such as shipbuilding, automotive, semiconductors, and steel.

The shutdown of NCC facilities could trigger a chain reaction, potentially disrupting downstream industries that rely on stable supplies of ethylene and related materials.

The shipbuilding sector is also facing growing challenges, as supplies of ethylene gas used in steel cutting may be disrupted. A depletion of inventories could significantly delay ship construction schedules.

Since the outbreak of the conflict, crude oil prices (Dubai benchmark) have surged by 51%. Prices of naphtha and ethylene have risen even more sharply—by 55% and 74%, respectively—amid concerns over supply shortages.

 

 

 

Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)