[Market Focus] Petrochemical Restructuring Begins... Related Stocks on the Rise

As the restructuring of the petrochemical industry accelerates and related government support is anticipated, the stock prices of domestic petrochemical-related companies are on the rise.

As of 9:22 a.m. on August 21, Korea Petrochemical Ind. was trading at 108,500 won, up 11,400 won (11.74%) from the previous trading day. At the same time, Lotte Chemical (11.25%), LG Chem (4.59%), Kumho Petrochemical (4.05%), Aekyung Chemical (2.67%), and SK Chemicals (1.82%) were also showing upward trends.

The previous day, the Ministry of Trade, Industry and Energy hosted the "Petrochemical Industry Business Restructuring Voluntary Agreement Ceremony," which was attended by ten major chemical companies. At the event, the "Three Key Directions for Restructuring" and the "Three Principles of Government Support" were presented. Each company is expected to submit detailed plans by the end of the year.

The main points include: ▲reducing 2.7 to 3.7 million tons of NCC (naphtha crackers), ▲transitioning to high value-added and eco-friendly products, and ▲minimizing the impact on the regional economy and employment. The scale of facility reduction represents 21% to 28% of Korea's total ethylene production capacity. The government plans to review each company's proposals and prepare a support package including financial assistance, tax benefits, and regulatory easing.

Jinmyung Lee, a researcher at Shinhan Investment Corp., said, "If the consolidation of crackers by industrial complexes, similar to Japan's past restructuring cases, becomes a reality through this announcement, it will be possible to improve the supply-demand balance." He added, "Although significant fundamental changes in the short term are limited, given the current low oil prices and the easing of supply pressure, there is a higher likelihood of improvement rather than further deterioration at this point."