The restructuring efforts crucial for the survival of South Korea's petrochemical industry are stalling due to conflicts among major companies, raising concerns about the Ministry of Trade, Industry and Energy's ability to coordinate effectively. With additional restructuring outcomes unlikely this year, the industry is bracing for worsening challenges as oversupply is expected to deepen next year.
According to data submitted by the Ministry of Trade, Industry and Energy to lawmaker Yoon Han-hong on October 22, three of the five restructuring projects agreed upon by the government and industry are currently stalled, while the Daesan 1 project (Lotte Chemical, HD Hyundai Oilbank, HD Hyundai Chemical) and the Yeosu 1 project (Hanwha Solutions, DL Chemical, Lotte Chemical, Yeocheon NCC) have received approval.
Previously, the government had pledged to accelerate restructuring in the petrochemical sector. Minister of Trade, Industry and Energy Kim Jeong-kwan stated after a meeting with CEOs from the petrochemical industry at the Korea Chamber of Commerce and Industry in December last year that a 'final restructuring plan' would be released by the first quarter of next year.
In response to inquiries about the status of the remaining three restructuring projects, the ministry indicated that discussions are ongoing regarding asset valuations and the scope of corporate integrations to finalize the business restructuring plans.
Regarding the highly anticipated integration of naphtha cracking facilities (NCC) between LG Chem and GS Caltex in the Yeosu industrial complex, the ministry provided a general response, stating that detailed discussions are taking place among companies through public-private consultative bodies.
For the restructuring involving S-Oil, SK Geo Centric, and Daehan Chemical, the ministry noted that all companies that signed the voluntary agreement for restructuring are currently negotiating details on facility reductions and transitions to high-value-added production, but no specific agreements have been finalized yet.
The approved Daesan 1 and Yeosu 1 projects aim to reduce ethylene production by 2.49 million tons over the next three years, but they are still in the early stages. Meanwhile, S-Oil's Shahin project is set to begin mass production early next year, with an annual ethylene production capacity of 1.8 million tons. If additional restructuring does not gain momentum, addressing the oversupply issue may become increasingly difficult.
As low-cost competition from China continues and the ongoing conflict in the Middle East disrupts naphtha supply, the petrochemical industry is facing heightened pressures amid declining profitability. A ministry official acknowledged that the restructuring efforts have been somewhat delayed due to issues arising from the Middle East conflict, stating, 'We are actively engaged in discussions.'
Lawmaker Yoon Han-hong criticized the government for presenting an unrealistic timeline that is difficult to adhere to, emphasizing that the government has not demonstrated the execution capability and results commensurate with its urgency regarding restructuring. He added, 'As the business reorganization is delayed, the effectiveness of the restructuring will inevitably diminish, and we must not waste the golden time to restore industrial competitiveness.'
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.