Yeocheon NCC Faces Default Crisis... Hanwha Says "Financial Support Needed" vs. DL Calls for "Assessment First"

Following an Additional Request After Injecting 200 Billion KRW in March
Both Companies Hold a 50:50 Stake... Hanwha: "Let's Prevent Default"
Joint Task Force Launched... Three Consecutive Years of Net Losses

Yeocheon NCC, a joint venture co-invested by Hanwha Solutions and DL Chemical, is facing a default crisis due to a shortage of 310 billion KRW in operating funds. While Hanwha Solutions has officially expressed its willingness to provide additional financial support, DL Chemical has taken a cautious stance, insisting that the company's management status must be reviewed first. The future of Yeocheon NCC's survival will be determined by the outcome of negotiations between the two parties.

According to the petrochemical industry on August 8, Yeocheon NCC will face default if it fails to secure 310 billion KRW in operating funds by August 21. Previously, in March, Yeocheon NCC had requested a capital injection of 100 billion KRW from both shareholders due to a liquidity crisis. Hanwha Solutions and DL Chemical accepted the request and injected a total of 200 billion KRW through a paid-in capital increase. A DL Chemical representative explained, "At that time, Yeocheon NCC reported that there would be no financial issues until the end of the year, but only three months later, they are requesting additional funds again."

Yeocheon NCC Plant 3 in Yeosu City, Jeollanam-do. Photo by Yonhap News

Hanwha Solutions received board approval at the end of last month for a 150 billion KRW loan proposal. However, due to the structure of the joint venture, unilateral execution is not possible, so the funds have not yet been disbursed. Hanwha Solutions strongly criticized DL Chemical for evading responsibility, stating, "If both shareholders provide 150 billion KRW each and combine this with guarantees from the Korea Development Bank and asset securitization, default can be avoided." Hanwha Solutions also emphasized the possibility of recovery, saying, "By halting plant operations, annual costs can be reduced by 9 billion KRW, and diversification of raw materials can also be pursued."

However, DL Chemical maintains that "rather than simply injecting money, it is necessary to first confirm why the cash flow has deteriorated so rapidly and whether any self-rescue measures are in place." In fact, Yeocheon NCC recorded a loss of 110 billion KRW in the second quarter, significantly exceeding the initially expected loss of 20 billion KRW. DL Chemical believes that injecting additional funds without due diligence on the current management status and its causes would be irresponsible.

The two companies have now formed a joint task force (TF) team and have begun due diligence. DL Chemical emphasized, "We are not unconditionally refusing to provide financial support, but are prioritizing understanding the situation to make a responsible decision."

Yeocheon NCC was established in 1999 as a joint venture with Hanwha Solutions (then Hanwha Petrochemical) and DL Chemical (then Daelim Industrial) each contributing a 50% stake. It is the third largest ethylene producer in South Korea and once earned nearly 1 trillion KRW in annual profit. However, it has recorded net losses for three consecutive years. The company posted losses of 347.7 billion KRW in 2022, 240.2 billion KRW in 2023, and 236 billion KRW in 2024. Starting this month, operations at Plant 3 in Yeosu have also been suspended.