Joint Management Partners Inject Capital into Struggling Yeocheon NCC
Workout Averted and Short-term Crisis Eases
Without Structural Solutions, Conflicts May Recur
Limitations of the Joint Venture Model Exposed
DL has officially announced a 150 billion won support package for Yeocheon NCC, which has been struggling with management difficulties, following a tense standoff with Hanwha. However, ongoing conflicts with its joint management partner Hanwha over raw material supply contracts continue, leaving uncertainty as to whether this measure will serve as a catalyst to save the 'golden time' for Yeocheon NCC's normalization.
On the morning of August 14, DL Chemical held an emergency board meeting and resolved to lend approximately 150 billion won to Yeocheon NCC. A significant portion of the 200 billion won rights offering for shareholders, approved on August 11, will be injected into Yeocheon NCC. Previously, DL Group had taken a negative stance on immediate support, emphasizing that Yeocheon NCC's management situation and self-rescue measures should come first.
Yeocheon NCC is the third-largest ethylene producer in Korea, with Hanwha Solutions and DL Chemical each holding a 50% stake. From 2022 through last year, the company accumulated losses totaling 770 billion won, and its financial structure has rapidly deteriorated recently due to oversupply from China. The company needs about 300 billion won in operating funds by the end of the year, with 36 billion won required by August 21 and a total of 180 billion won to be raised by the end of this month.
Industry observers believe that the discussions surrounding this support decision have clearly revealed differences over the terms of the raw material payment contract, highlighting the limitations of joint venture operations. The DL side argued, "Hanwha is maximizing its own profits by receiving ethylene under conditions that make it difficult to secure market competitiveness." In contrast, Hanwha maintained, "A tax audit by the National Tax Service confirmed that DL traded at prices lower than the market rate," and insisted, "Let's sign contracts under fair conditions after the funding support is provided."
DL Chemical's capital injection is expected to somewhat ease Yeocheon NCC's short-term liquidity crisis. However, lingering tensions over the raw material supply contract and profit-sharing structure remain, making future negotiations between Hanwha and DL a critical turning point for Yeocheon NCC's survival.
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