Key Russian fuel finds its way back to buyers in South Korea

South Korean imports of Russian naphtha have started to rebound as processors in the Asian petrochemicals hub return to the trade after initially shunning it following the outbreak of war in Ukraine.

The nation has drawn nearly 160,000 tons of the vital-but-lesser-known fuel directly from Russia so far in May, according to Kpler data compiled by Bloomberg. That puts imports on course for the highest monthly total in about a year, although the figure remains well below levels seen before the conflict. 

While South Korea doesn’t have sanctions on Russian energy, local processors — several of which are linked to US and European owners — had turned away from Russian fuels after Moscow’s invasion in February 2022, with naphtha flows dropping to zero. On the whole, Russia has managed to sustain its shipments of crude and petroleum products, largely by rerouting flows toward Asian buyers.

Data from Vortexa Ltd. point to a similar trend, with South Korea’s imports of Russian naphtha growing to 63,000 barrels a day in May from zero in March.

More local buyers are taking Russian naphtha directly, or through commercial hubs such as Singapore, according to people familiar with the trade. The influx of cheap Russian fuel into Asia is also beginning to eat into Middle Eastern suppliers’ market share in the region, they added.

Naphtha is a key feedstock needed for making a variety of plastics and chemical products. The bulk of the latest flows have been arriving in Yeosu port, one of South Korea’s key petrochemical production complexes.