Black smoke pours out of a chemical factory chimney in the Daesan Petrochemical Complex in the central city of Seosan on Feb. 25, 2025, in this photo provided by a reader. (Image courtesy of Yonhap)
SEOUL, Aug. 20 (Korea Bizwire) — South Korea’s embattled petrochemical industry has agreed to slash its core production capacity by as much as a quarter, in a government-backed effort to stave off collapse and reposition for higher-value growth.
The Ministry of Trade, Industry and Energy said Wednesday that 10 companies operating naphtha cracking centers (NCCs) will collectively reduce output by 2.7 million to 3.7 million tons, or 18 to 25 percent of the nation’s total capacity of 14.7 million tons.
The decision, announced at a signing ceremony in Seoul with industry officials and Trade Minister Kim Jung-kwan, marks the most drastic coordinated cut in the sector’s history.
The move comes as oversupply, weak margins, and global competition have battered the industry. Consulting firm Boston Consulting Group advised the Korea Chemical Industry Association in drafting the reduction targets.
Deputy Prime Minister Koo Yoon-chul, who presided over a meeting of economic ministers earlier in the day, underscored a policy of “self-help first, government support later.” Companies must present binding restructuring plans centered on capacity cuts before they can access relief measures such as financing, tax breaks, research funding, or regulatory easing.
The government outlined three priorities for restructuring: reducing excess capacity while shifting toward specialty products, restoring financial soundness, and minimizing damage to local economies and jobs.
The Yeosu National Industrial Complex is the world’s largest single-site petrochemical hub, housing more than 280 companies. In Korea, a popular saying goes, “Don’t boast about your looks in Suncheon, your fists in Beolgyo, or your wealth in Yeosu”—a testament to Yeosu’s reputation as a symbol of economic prosperity in the southern part of the peninsula. (Photo courtesy of Jeollanam-do Province)
It also laid out three guiding principles for support — simultaneous restructuring across major petrochemical clusters, credible and self-driven restructuring plans, and comprehensive government assistance.
Officials stressed that state aid would be distributed unevenly, rewarding companies that commit to deep restructuring and penalizing those that attempt to free-ride on others’ cutbacks.
In a sign of urgency, Koo urged firms not to wait until year-end deadlines to submit their plans: “Companies and shareholders must make painful self-rescue efforts. The government expects restructuring proposals as soon as next month.”
To cushion the blow in manufacturing hubs, the government is weighing designating Seosan as an “industrial crisis response zone,” after granting the same status to Yeosu in May.
The sweeping restructuring push reflects the depth of the industry’s malaise — and the government’s determination to force a long-fragmented sector into consolidation.
M. H. Lee (mhlee@koreabizwire.com)
