TOKYO • Consumers in Japan may face a costlier bill to stay warm this winter if South Korea bans exports of heating fuel to its neighbour as the trade feud between the two countries deepens.
Kerosene is used as a fuel in portable stoves and fan heaters, particularly in the colder northern part of Japan. While local production accounts for about 90 per cent of consumption, most imports come from South Korea.
An export ban by Seoul - especially if accompanied by refinery outages or a severe winter - could cause shortages and price spikes, according to six traders.
The North Asian neighbours have been at loggerheads since late last year over proper compensation for Koreans forced to work in Japanese-run factories, mines and brothels during World War II.
The dispute has escalated in recent weeks, with Tokyo and Seoul removing each other from preferred trading lists and South Korean consumers boycotting Japanese products.
"The likely outcome of any potential ban of kerosene exports from South Korea to Japan will be a period of acute supply tightness," said Mr Peter Lee, an analyst at Fitch Solutions in Singapore.
The impact will be magnified if it happens in winter when Japan becomes more reliant on term cargoes from South Korea, he said.
Some 79 per cent of Japan's kerosene imports last year came from South Korea, with those shipments accounting for 13 per cent of total requirements, according to government data. Japanese refiners typically start stockpiling fuel from South Korea as early as August to prepare for winter.
Japan would likely turn to China and Singapore for kerosene and petrol imports in the event of a South Korean ban, said Mr Sushant Gupta, director of Asia-Pacific refining at Wood Mackenzie in Singapore.
While replacement supplies are available, expensive freight costs and a lack of receiving capacity at ports make transporting the fuel difficult, said several traders who did not want to be named due to company policy.
Domestic kerosene prices were 90.9 yen (S$1.18) per litre last Tuesday, compared with an average of 92.6 yen over the past year, according to data from Japan's Oil Information Centre.
JXTG Holdings, Japan's biggest refiner, said it was not too concerned about the rise in tensions. "There's no particular impact on our energy business for the time being, but we need to pay close attention to developments," said its senior vice-president Yoshiaki Ouchi.
Idemitsu Kosan, however, said it has to think about how to prepare if the political situation worsens. The refiner has options including producing more kerosene locally, importing more from other nations or building up bigger inventories than usual before winter, said executive officer Noriaki Sakai.