Supply shortage warning! Are Koreans frantically buying trash bags? The reason is that "industrial rice" is running out...

Recently

A trend is sweeping through South Koreans’ social circle feeds

of “buying up trash bags”

Convenience store shelves have been emptied

Posts on social platforms are all asking for restocks

Even though the official statement says inventories are enough to last a year

Why are people still hoarding like crazy?

The answer is hidden thousands of miles away—in the Middle East

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Once the situation there escalates

South Korea’s energy supply chain “collapses” directly

Even naphtha, known as “industrial rice,”

is going to have exports banned

The price of “industrial rice” soars by more than 50%

Information from South Korea’s Ministry of Trade, Industry and Energy shows that starting at 00:00 on the 27th, South Korea has fully banned naphtha (naphtha) exports to ease the domestic shortage of naphtha supplies, with the deadline set provisionally at 5 months.

“Naphtha” differs from “oil” by just one character; it is a light oil produced during oil refining. It is widely used in industry and is nicknamed “industrial rice.” It can be used to produce basic chemical products such as ethylene and propylene—for example, plastic packaging and building materials—and it can also be applied in industries like semiconductors and automobiles.

According to S&P Global Energy data, the price of naphtha has risen by more than 50% since last month.

South Korea is one of the world’s largest importers of naphtha. A shortage in the supply of raw materials has left LG Chem, South Korea’s largest petrochemical company, with no choice but to decide last week to shut down part of the production units at its Yeosu core plant area.

After restricting naphtha exports, South Korea’s Ministry of Trade, Industry and Energy also said that considering how the Middle East situation affects energy supply, the South Korean government is studying plans to impose export restrictions on petrochemical products. It will closely monitor relevant developments and make a decision after comprehensive analysis.

South Korea’s recent restrictions on naphtha exports (Xinhua News Agency photo)

“Trash bag buying frenzy”

Because of concerns about the transmission effect of supply pressure, shortages have appeared in standard trash bag supplies in multiple regions across South Korea. A convenience store employee said that trash bags in commonly used sizes inside the store have been snapped up completely, but customers are still arriving at the store to ask about restocks. At the same time, consumer anxiety is spreading across social platforms, and some South Koreans have begun stocking up on trash bags, further raising market tension.

In response, the South Korean government emphasized that inventories are sufficient at this stage and there is no need to stock up. Even if raw material supply is completely cut off, production can still be maintained for about a year.

This round of “trash bag buying frenzy” in South Korea is a snapshot of the “butterfly effect” in the global market triggered by the escalation of the Middle East situation. According to estimates from South Korea’s industry, if the South Korean government takes no action, South Korea’s naphtha inventory would be enough to last only about two weeks. A survey by the Korea Plastics Industry Association shows that among 37 companies interviewed, 71% received notices of reduced supply or the suspension of upstream raw material deliveries, and 92% were told that raw material prices would rise.

According to data from the International Energy Agency, as Asia’s largest naphtha importer, South Korea needs to import about 45% of its naphtha each year, and as much as 77% of that comes from the Middle East.

South Korea’s Minister of Trade, Industry and Energy Kim Jong-gwan said that naphtha is a basic raw material supporting the development of South Korea’s industries, and the supply of naphtha needed for producing medical care and public health, key industries, and daily necessities will be prioritized.

Energy warnings in two periods within 20 days

Affected by the Middle East conflict

Since March

South Korea has divided energy safety into four levels of warnings

with continuous adjustments

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According to information compiled from public sources

• South Korea first issued a “Level 1 warning” on March 5, which is the “pay attention” stage;

• More than 10 days later, given that there were no signs of improvement in the conflict, the energy warning was raised to Level 2, the “monitor” stage;

• On March 25, it moved to an “emergency mode,” indicating that the tightening situation of energy supply in South Korea is still escalating.

Under relevant South Korean regulations, after a resource safety crisis warning is raised to the “monitor” level, the government will strengthen measures to manage oil supply and demand. It will exercise its priority right to purchase international oil reserves jointly held, and look for alternative energy supply routes that do not go through the Strait of Hormuz. The South Korean government expects that supply-demand balance can only be achieved at the end of April or early May.

In a report, analyst Kim Kimyung from Korea Investment & Securities wrote: “More and more concerns believe that the deterioration of the petrochemical supply chain will trigger a chain reaction, leading to production disruptions in downstream industries such as automobiles, home appliances, shipbuilding, construction, and even food.”

For this energy crisis more severe than expected, scholar Kim Yoon-jun of South Korea told First Finance and Economics that on one hand, shipping disruptions have led to a sharp rise in South Korea’s energy procurement costs, and inventory buffers have dropped significantly. When agencies related to oil are hit, costs for gasoline and diesel, heating, and more rise accordingly. On the other hand, higher prices increase pressure on people’s livelihoods.

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