The ongoing Middle East crisis is escalating into a comprehensive economic war, which poses significant risks to the South Korean industrial sector as production costs are projected to rise sharply due to a potential blockade of the Strait of Hormuz.
The recent escalation in the Middle East has shifted from military conflicts to a broader economic warfare that directly targets industrial foundations and supply chains. Following the Iranian assault on gas fields in response to Israeli military actions, concerns have intensified regarding the recovery of international energy supply chains, which could take considerable time. Analysts warn that if the blockade of the vital Strait of Hormuz lasts for three weeks, the production costs for South Korean manufacturers could soar by more than 5%. This alarming forecast has prompted urgent discussions within the industrial sector about effective countermeasures to cope with rising energy prices.
As the situation evolved last month with the US and Israel's military operations against Iran, the past three weeks have seen South Korean industries frantically devising strategies to address skyrocketing oil prices, with an impending supply crisis looming. The oil refining and petrochemical industries, in particular, face immediate challenges as they struggle to secure alternative supply chains. Current reserves held by the government and private sectors amount to approximately 190 million barrels, which officials state could last about 200 days; however, this calculation is based on average import volumes set by the International Energy Agency (IEA), and actual consumption figures indicate a mere 68-day supply.
The petrochemical sector's condition is even more precarious, as their stockpile of naphtha—the fundamental raw material derived from crude oil—is only sufficient for 2-3 weeks. This situation raises fears that naphtha cracking facilities (NCCs) may halt operations within a month if supply chains remain disrupted. As naphtha is critical for producing essential products like ethylene used in plastics and synthetic fibers, the lack of a comprehensive response strategy to manage this crisis leaves individual companies vulnerable and uncoordinated, heightening the risk of a broader industrial fallout as the crisis unfolds.
