In response to the geopolitical tensions following the U.S. and Israel's aggression against Iran, Yeocheon NCC, South Korea's largest ethylene producer, has notified its customers of an inability to supply products, declaring 'force majeure.' The announcement came after the blockade of the Strait of Hormuz led to significant delays in the delivery of essential raw materials, particularly naphtha, which is crucial for producing ethylene. Industry experts warn that if the blockade continues, the disruption could escalate beyond Yeocheon NCC, impacting the broader petrochemical sector and related industries such as rubber, plastics, and textiles.

The situation has been exacerbated by Yeocheon NCC's previous decisions to scale back production due to a combination of overcapacity from China and deteriorating operational conditions, ultimately leading to the recent factory restructuring. The company had already reduced its operating capacity by halting the operations of its third plant late last year, now running only two plants. Consequently, lower inventory levels of naphtha have left Yeocheon NCC particularly vulnerable to the ongoing crisis in the Middle East.

The broader implications of this crisis are significant, as the South Korean petrochemical industry heavily relies on imported naphtha, with over half of its supply coming from imports, a substantial portion of which must transit through the Strait of Hormuz. In stark contrast to the government's strategy of stockpiling oil for extended periods, companies typically maintain only short-term stockpiles of one to two months for naphtha, risking substantial shortages that could disrupt manufacturing processes in industries that rely on ethylene, termed the 'rice of industry.'