Korea resumes Russian naphtha imports

LG Chem's factory in Seosan, South Chungcheong Province / Courtesy of LG Chem

Korea resumed importing naphtha from Russia through a legal route Monday, four years after Western sanctions halted the Asian country's purchases of the key petrochemical feedstock from the world's largest nation.

According to industry officials, LG Chem succeeded that day in bringing in 27,000 tons of Russian naphtha to Korea, which is expected to be used at one of the company’s naphtha cracking centers (NCCs) in Seosan, South Chungcheong Province.

The Ministry of Trade, Industry and Resources also reportedly briefed lawmakers from the ruling Democratic Party of Korea about the resumption during a meeting earlier that day.

The volume of the recent Russian naphtha imports is considered large enough for LG Chem’s NCC to operate an additional three to four days. Korean NCCs use an average of 4 million tons of naphtha per month to produce raw materials for petrochemical products such as plastic bags, food packaging and cosmetic containers.

The war in Iran has disrupted naphtha shipments through the Strait of Hormuz, leaving Korean petrochemical firms and the government struggling to address the shortage. Last week, the government began restricting naphtha exports by local oil refiners.

Even after the United States issued a 30-day waiver on March 12 allowing countries to buy Russian oil and petroleum products carried on vessels, concerns had remained over payment methods and potential secondary sanctions.

In response, the government confirmed with the U.S. Department of the Treasury that companies can make payments in currencies other than U.S. dollars and that no punitive measures would be imposed.

Still, uncertainties linger over further imports of Russian naphtha, as companies must complete contracts, payments and transport by April 11.

The European Union’s hard-line stance on energy trade with Russia is another unfavorable factor, given that Korean petrochemical firms bound by international regulations.

Korea relies on imports for about 45 percent of its naphtha demand, with Middle Eastern supplies accounting for 77 percent of total imports.

Data from the Korea International Trade Association showed that Russian naphtha accounted for nearly 30 percent of Korea’s total imports before Western sanctions halted trade.