[123RF]
[123RF]

The war in the Middle East has laid bare the vulnerability of South Korea's resource supply chains, prompting calls for urgent action to reduce the country's dependence on imported raw materials — particularly naphtha.

The Korea Environment Institute (KEI) said Wednesday it had released a KEI Focus report titled "Changes in Middle East Conditions and the Naphtha Supply Chain Crisis: A New Opportunity for Korea's Transition to a Naphtha-Free Circular Economy," outlining ways to reduce naphtha dependence across industry.

The outbreak of the US-Iran war in February brought traffic through the Strait of Hormuz — a critical chokepoint for roughly 20 percent of global seaborne crude oil shipments — to a complete halt, triggering a sharp spike in oil prices and serious supply disruptions.

Even if the Strait of Hormuz reopens, petrochemical feedstock prices are not expected to recover quickly to pre-crisis levels.

The petrochemical industry is one of South Korea's core industries, relying on naphtha cracking center (NCC) technology that uses naphtha as a feedstock to produce and supply commodity products.

Because the process depends on naphtha derived from crude oil refining, cost competitiveness rises and falls with oil prices.

[KEI Focus report, "Changes in Middle East Conditions and the Naphtha Supply Chain Crisis: A New Opportunity for Korea's Transition to a Naphtha-Free Circular Economy," Korea Environment Institute]
[KEI Focus report, "Changes in Middle East Conditions and the Naphtha Supply Chain Crisis: A New Opportunity for Korea's Transition to a Naphtha-Free Circular Economy," Korea Environment Institute]

South Korea imports 45 percent of its domestic naphtha demand, with 77 percent of those imports coming from the Middle East. If supply stability deteriorates, the impact could ripple well beyond the petrochemical sector, affecting industries closely tied to everyday life — including healthcare, food and packaging.

"The naphtha supply chain crisis triggered by this war is not simply a temporary period of high oil prices," the report said. "What demands attention is that it reflects the risks of making a core national industry entirely dependent on a specific geopolitical region — the Middle East — and a finite resource in fossil fuels."

The report said the country must move beyond emergency response frameworks focused on protecting existing supply chains and maintaining inventories, and pursue medium- to long-term structural reforms that reduce dependence on imported raw materials.

To that end, the report called for building a "naphtha-free circular economy" model — aimed at identifying essential uses, designing for recyclability, and optimizing the mix of renewable and fossil-based feedstocks — through diversifying recycling technology, replacing NCC processes and innovating production methods, transitioning to bio-based materials, and pursuing source reduction and upstream strategies.

[Renewable Energy Institute (2024), as cited in the report]
[Renewable Energy Institute (2024), as cited in the report]

Lee So-ra, head of the KEI's Circular Economy Research Division, said improving the circularity of the plastics value chain — spanning raw material extraction and production, product design, manufacturing and retail, consumption, and disposal and recycling — is essential to building resilience against localized supply constraints and price volatility in petrochemical feedstocks.


thlee@heraldcorp.com