Hanwha and DL Sign Raw Material Supply Contract with Yeocheon NCC, Accelerating Restructuring of Yeosu Industrial Complex

Agreement Reached After Pricing Disputes
Business Restructuring Plan Expected as Early as Next Week

Yeocheon NCC, the nation's third-largest petrochemical company by ethylene production (naphtha cracking facility), has reached an agreement on a raw material supply contract with its joint shareholders Hanwha Solutions and DL Chemical, accelerating the restructuring of the petrochemical industry in the Yeosu National Industrial Complex.

On December 12, DL Chemical announced that its board of directors had approved a long-term raw material supply contract with Yeocheon NCC. The raw materials covered by the contract include key NCC feedstocks such as ethylene and propylene. The contract period runs from January 1, 2025, to December 31, 2027. While specific pricing details were not disclosed, the company explained that prices were determined using an international market index and a cost-based formula.

Yeocheon NCC Second Plant Overview. Yeocheon NCC

Yeocheon NCC had previously supplied Hanwha Solutions and DL Chemical with 1.4 million tons and 735,000 tons of ethylene, respectively, but supply disruptions occurred due to disagreements over pricing. Although the petrochemical industry has been undergoing voluntary restructuring, Yeocheon NCC's inability to reach a price agreement between the two companies had hindered the restructuring process.

As the government-mandated restructuring deadline in December approached, both companies made concessions and ultimately reached an agreement.

With Lotte Chemical and HD Hyundai Chemical in the Daesan Industrial Complex having established a plan to consolidate and restructure their NCC (naphtha cracking facility) operations, expectations are rising that business restructuring in Yeosu will also gain momentum.

In addition to Yeocheon NCC, LG Chem, Lotte Chemical, and GS Caltex are operating NCCs in the Yeosu Industrial Complex. LG Chem and GS Caltex are continuing negotiations regarding the reduction of NCC capacity in Yeosu. LG Chem and GS Caltex each operate NCCs in Yeosu capable of producing 2 million tons and 900,000 tons of ethylene per year, respectively. There is discussion of LG Chem selling its NCC to GS Caltex, establishing a joint venture, and then operating the facilities in an integrated manner.