South Korean fuel exporters commit to key Asia-Oceania customers amid global trade jitters

South Korean clean oil product exporters plan to place greater emphasis on supplying their top customers in the Asia-Oceania market while leveraging the Seoul-Washington free trade agreement for middle distillate sales to the US, aiming to navigate the uncertainties surrounding global trade and tariffs.

The numerous uncertainties surrounding international trade tariffs since US President Donald Trump's administration took office have made it increasingly difficult to establish long-term supply contracts, not only with US buyers but also with other global markets, industry and refinery sources said over March 18-19.

Nevertheless, prioritizing key customers in the Asia-Oceania region, such as Australia and Japan, is crucial, according to product marketing managers at three major South Korean refiners and analysts from the Korea Petroleum Association based in Seoul.

Concerns are rising this year regarding the export environment for petroleum products, due to increased instability in the global economy influenced by the Trump administration's energy and trade policies, an official from the KPA said.

South Korea -- Asia's leading supplier of middle distillates -- exported 30.88 million barrels of clean products, including gasoline, jet fuel/kerosene and diesel, in January, down 14% year over year, the latest data from the Korea National Oil Corp. showed.

In times of global trade uncertainties, securing market share in major outlets and instilling a sense of supply security and stability among key customers is essential. In recent years, Australia and Japan have become increasingly important customers, surpassing traditional top buyers like China and Singapore to emerge as the leading destinations for South Korean oil product exports, according to refinery product marketers.

The trend is attributed to the Australian government's expansion of diesel storage facilities by 780 million liters to enhance energy security, along with plans to increase the mandatory stockpiling days for oil importers to 32 days from 28, starting in the second half of 2024, the KPA reported.

"Australia is especially a VIP customer for South Korea's diesel fuel. We plan to ensure that our supply commitments to Australian buyers are fully met, regardless of international tariffs or geopolitical issues," a senior marketing manager at a South Korean refiner based in Ulsan said.

Japan has been consolidating its refineries as part of its decarbonization and energy-saving initiatives over the past decade, leading to a reduction in refining capacity and fuel production. In 2024, the country faced shortages of gasoline and aviation fuel due to a surge in overseas tourists, driven by a weak yen, according to the KPA.

South Korean jet fuel producers and suppliers have been prioritizing Japanese buyers when offering spot cargoes in the Asian market, especially since the third quarter of 2024, when Japan saw a record influx of foreign visitors, bolstered by a weak yen against the dollar.

Exports to US

Despite the tariff increases and threats posed by the Trump administration against many US trade partners, South Korea's gasoline and jet fuel exports to customers on the US West Coast are expected to remain stable in 2025, largely due to the South Korea-US FTA that took effect in 2012, according to refinery product marketers.

"The FTA is not something that can easily be overturned or changed ... The nearly zero tariff on oil products and crude oil trades is a significant win-win for both South Korea and the US," a marketing executive at another major South Korean refiner said.

South Korea exported 3.32 million barrels of jet fuel to the US in January, up from 2.92 million barrels a year earlier, according to KNOC data.

In a March 4 address to a joint session of Congress, Trump expressed concerns about South Korea's tariff rates, claiming they are four times higher than those of the US. However, officials and sources at the Ministry of Trade, Industry and Economy said that the South Korea-US FTA has facilitated the elimination of tariffs on the majority of goods exchanged between the two nations.

While South Korea's most-favored-nation (MFN) applied tariff rate is 13.4%, significantly higher than the US rate of 3.3%, it is important to note that this MFN rate differs from the preferential tariff rates established under the South Korea-US FTA for US goods and energy imports, MOTIE said in a statement.

The MFN tariff rates apply to imports from World Trade Organization member countries that do not have a preferential trade agreement with South Korea.

"As of 2024, South Korea's effective tariff rate for goods imported from the US stands at approximately 0.79%," a MOTIE official said.