The panoramic view of the Seosan Daesan Petrochemical Industrial Complex. (Image courtesy of Seosan city)
SEOUL, June 13 (Korea Bizwire) — South Korea’s petrochemical sector is ramping up restructuring talks, including potential consolidation of naphtha cracking center (NCC) facilities, as companies grapple with sustained oversupply from China and a prolonged global economic slowdown.
The shift comes as the administration of President Lee Jae-myung prepares to roll out policy support for the beleaguered industry later this year, raising hopes for government-backed solutions to declining profitability.
Oversupply Pressures Mount as Companies Consider Facility Consolidation
South Korea currently hosts 10 NCC facilities concentrated in key industrial clusters like Yeosu, Daesan, and Ulsan. Many of these are struggling under intensified global competition, particularly from China’s aggressive capacity expansion. Industry experts say the country must cut its NCC capacity by at least half to address the glut.
One of the most closely watched restructuring efforts involves a possible integration of facilities at the Daesan petrochemical complex between Lotte Chemical and HD Hyundai. The two firms jointly operate HD Hyundai Chemical, which produces 850,000 tons of ethylene annually.
Talks are underway for Lotte to transfer its separate facility—currently producing 1.1 million tons annually—to the joint venture, with HD Hyundai Oilbank potentially contributing additional capital or assets.
While both companies have said no final decisions have been made, the potential deal could catalyze broader realignment in the sector. LG Chem is also in long-running talks to sell its second Yeosu NCC plant to PIC, a subsidiary of Kuwait Petroleum Corporation, though the negotiations have stalled over valuation differences.
“The industry has been quietly discussing restructuring since 2022 when signs of a downturn became unavoidable,” said one industry source. “We’re now at a point where corporate-level consolidation is back on the table.”
LG Chem Yeosu CNT Plants 1, 2, and 3 (Image provided by LGChem)
Calls for High-Value Products and Government Backing Grow
Even if companies survive the current downturn, analysts say the industry’s future will hinge on a shift from commodity-grade output to high-value specialty chemicals. Yet such transformation requires substantial R&D and capital investment—something the industry says cannot happen without strong government support.
President Lee has pledged legislative backing to aid the transition, including a “Petrochemical Special Act” and plans to transform Yeosu and the eastern part of South Jeolla Province into hubs for environmentally friendly specialty chemicals.
While restructuring support measures were initially expected in early 2025, political turbulence surrounding last year’s impeachment crisis has delayed rollout.
The government’s forthcoming support package is expected to include legal reforms and financial incentives for plant closures, asset sales, joint ventures, operational streamlining, and M&A activity.
Still, the urgency is rising. S&P Global recently revised its 2025–2030 capacity outlook for petrochemical production upward, suggesting that Chinese-driven oversupply will persist and depress prices for basic products.
In the meantime, Korean petrochemical firms are scrambling to shore up liquidity through asset sales and preemptive refinancing efforts, aware that the restructuring window could soon close.
“The golden hour to reposition the industry is narrowing,” said Choi Young-kwang, an analyst at NH Investment & Securities. “Without bold structural reform and a shift toward specialization, Korea risks losing its competitive edge in the global petrochemical market.”
M. H. Lee (mhlee@koreabizwire.com)
