Ministry of Trade, Industry and Energy Finalizes Petrochemical Industry Restructuring Plan
Focus on Incentives Through Coordination with Relevant Ministries and Industry
The government is initiating a restructuring of the petrochemical industry, which is facing a crisis due to global oversupply and weakened competitiveness. The government plans to set the stage for voluntary business restructuring both between and within companies, ensuring that this process proceeds swiftly. It is expected to focus support on various areas such as finance, funding, and taxation, so as not to miss the 'golden time' for structural reform.
According to the government on August 17, the Ministry of Trade, Industry and Energy has prepared a 'Petrochemical Industry Restructuring Plan' and has entered the final coordination phase with relevant ministries and the industry. The plan is scheduled to be announced within this month at the latest.
The domestic petrochemical industry has been experiencing a deepening downturn for three to four years, as profitability has deteriorated due to oversupply from large-scale facility expansions in the Middle East and China, combined with sluggish demand. Recently, Yeocheon NCC, a joint venture established by Hanwha Group and DL Group, faced a crisis of default due to worsening financial structure from accumulated losses, and had to receive emergency capital injections such as additional investments and paid-in capital increases.
According to a consulting report conducted by the Korea Chemical Industry Council through Boston Consulting Group (BCG), considering the operating profits and financial conditions of domestic petrochemical companies, if the current downturn continues, it is projected that half of these companies will not be able to survive after three years.
The restructuring plan to be announced by the Ministry of Trade, Industry and Energy this month is said to focus on various incentives to encourage companies to voluntarily pursue business restructuring. If the companies involved make 'decisions' to voluntarily streamline or adjust their businesses based on their own mid- to long-term business plans and profit and loss calculations, or through mergers and acquisitions (M&A), the government will provide various institutional and administrative support to ensure that restructuring is carried out quickly.
This set of measures is also expected to include specific restructuring plans and figures for individual companies. As it is inevitable to adjust production volumes in response to global oversupply, the industry is expected to establish an operational plan for production facilities at a level that can maintain competitiveness, based on discussions within the sector.
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