Minister Kim Jeonggwan to Visit Ulsan NCC on September 18
Government Calls for "Speedy Action" at September 4 Public-Private Meeting
Support Promised Based on the Act on the Promotion of Corporate Vitalization... Industry Remains Cautious
The petrochemical industry, which must voluntarily reduce its ethylene production capacity, is grappling with the government's request to submit business restructuring plans. Earlier this month, the Ministry of Trade, Industry and Energy asked major petrochemical companies to prepare and submit restructuring plans, citing corporate support and other reasons. However, as of ten days after the request, not a single company has submitted the required documents. Minister Kim Jung-kwan of the Ministry of Trade, Industry and Energy plans to visit the Ulsan Petrochemical Complex this week to emphasize the need for business restructuring.
According to industry sources on September 16, the Ministry of Trade, Industry and Energy strongly urged ten major oil refining and petrochemical companies to submit restructuring applications within the year during a public-private meeting held on September 4, which was also attended by the Ministry of Economy and Finance and the Fair Trade Commission. At the meeting, a ministry official pressed the companies, stating, "You must complete your restructuring plans within this year," and further urged them to "bring whatever you have, even if it is not 100% finalized," emphasizing the need for speed.
The petrochemical companies are being cautious about what to include in their plans. Lotte Chemical stated, "We are in the preparation stage," and added, "We are reviewing various strategic options." Another industry official said, "Since we have agreed to submit restructuring plans by the end of the year, each company is preparing its documents accordingly." Na Seong-hwa, Director of Industrial Supply Chain Policy at the ministry, explained, "Companies are currently in the preparation stage for drafting their restructuring plans," and added, "In addition to the overall meetings, we are continuing to hold smaller meetings as well."
Minister Kim Jung-kwan is scheduled to visit the Ulsan Petrochemical Complex on September 18 to reiterate the need for business restructuring. The visit was originally planned for last week but was postponed due to an unexpected business trip to the United States. The fact that the minister confirmed the site visit immediately after returning to Korea is interpreted as an indication that business restructuring in the petrochemical sector is being treated as a top national agenda, prioritized even over urgent trade issues.
Ulsan is where a large-scale expansion by S-Oil has been announced, while SK Geocentric and Korea Petrochemical Ind. Co. are under strong pressure to undergo restructuring. Although these companies are not large in scale, they maintain high operating rates at their naphtha cracking centers (NCCs) and have achieved vertical integration, so they insist that further reductions in production capacity are not possible. Minister Kim's onsite visit is expected to serve as an opportunity to encourage companies to submit their restructuring documents and to reaffirm the government's determination.
Last month, vehicles were coming and going to construct facilities as part of the S-Oil Shahin Project at the Onsan Petrochemical Industrial Complex in Ulsan. Photo by Oh Ji-eun
Yeosu, which has many aging facilities, is considered the region under the greatest restructuring pressure. Yeochun NCC, a joint venture between Hanwha Solutions and DL Chemical, recently halted operations at its third plant, which has an ethylene production capacity of 470,000 tons. LG Chem, which has a production capacity of 2.08 million tons in Yeosu, attempted to sell its second plant (about 800,000 tons) but the deal fell through. As a result, the company is now considering vertical integration of its refining and petrochemical businesses with GS Caltex. Lotte Chemical also began discussions on integrating with Yeochun NCC, but no tangible results have been achieved so far.
At the Daesan Petrochemical Complex in Seosan, South Chungcheong Province, HD Hyundai Chemical and Lotte Chemical are showing relatively advanced progress by requesting specific government support based on the premise of integrating their NCCs, which operate at 850,000 tons and 1.1 million tons, respectively. However, concrete implementation plans have not yet been finalized. In particular, Daesan is reportedly considering the introduction of ethane to diversify NCC feedstock, suggesting that the focus is shifting more toward increasing utilization rather than reducing facilities.
The government cites the Act on the Promotion of Corporate Vitality as the legal basis for this round of business restructuring. This law provides tax benefits and financial and regulatory exemptions to companies in oversupplied industries to help them swiftly carry out restructuring. Government support is provided only after the submitted restructuring plans are approved. A representative from the Korea Chemical Industry Council said, "Support measures will be prepared based on the legal foundation of the Act on the Promotion of Corporate Vitality," and added, "We are also conducting a demand survey regarding proposed amendments to the law."
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