[Exclusive] Yeocheon NCC to Shut Down 915,000-Ton Facility First... Ethylene Reduction Target Likely to Be Exceeded

Second Plant to Be Closed First; Third Plant Also Under Review
Compromise Reached Between Major Shareholders DL Chemical and Hanwha Solutions
Business Restructuring Plan to Be Submitted This Week; Outline of Industry Restructuring Emerges

Yeocheon NCC, which had initially planned to shut down its third naphtha cracking center (NCC) with an annual ethylene capacity of 470,000 tons, has shifted its stance to prioritize the closure of its second plant, which has a capacity of 915,000 tons. This decision comes as DL and Hanwha, the major shareholders of Yeocheon NCC, failed to reach an agreement on the scale of ethylene production cuts, leading to a compromise to close the 910,000-ton facility first. Yeocheon NCC plans to submit its business restructuring plan, which includes the closure of the second plant, to the government this week. However, since there is little likelihood that the currently suspended third plant will resume operations, it is expected that Yeocheon NCC will effectively maintain only its first plant (with an annual ethylene capacity of 900,000 tons). With Yeocheon NCC agreeing to reduce production by up to 1.4 million tons, the domestic ethylene reduction scale is expected to exceed the government and industry’s proposed petrochemical restructuring target of 2.7 million to 3.7 million tons.

According to industry sources on December 18, DL and Hanwha, the major shareholders of Yeocheon NCC, have agreed to shut down the second plant with an ethylene production capacity of 915,000 tons first, and plan to submit the restructuring plan this week. The closure of the third plant (470,000 tons) is not included in the current plan, but discussions are ongoing about potentially shutting it down in the future.

Yeocheon NCC has the largest production capacity (2.28 million tons) among domestic NCC operators. This decision is seen as more than just a company-level restructuring; it is regarded as a signal of a fundamental transformation across the entire industry.

The inclusion of the second plant closure instead of the third plant in the restructuring plan is understood to be the result of a compromise between Hanwha Solutions and DL Chemical, the major shareholders of Yeocheon NCC. Recently, Kim Gilsoo, CEO of Yeocheon NCC, proposed to Hanwha Solutions a reduction of up to 1.4 million tons of facilities in response to the government-led restructuring policy, and Hanwha Solutions decided to close the second plant based on consulting results and other considerations.

Hanwha Solutions and DL Chemical, the major shareholders of Yeocheon NCC, have previously had differing views on the direction of restructuring due to differences in production structures and interests. Hanwha Solutions, which relies heavily on internal ethylene procurement, has been relatively passive about facility closures due to concerns about supply stability, whereas DL Chemical, which is focused on C4-based products and already has a high proportion of external procurement, has strongly advocated for reducing unprofitable Yeocheon NCC facilities. The prolonged industry downturn, combined with government pressure for restructuring, ultimately led the two companies to agree on a restructuring plan centered on closing the second plant.

Yeocheon NCC Plant 1 Overview. The Asia Business Daily DB

Yeocheon NCC’s decision for a large-scale reduction is expected to serve as a catalyst for accelerating the restructuring of the petrochemical industry. The Yeosu Industrial Complex has the largest NCC production capacity among domestic petrochemical complexes, and there have been ongoing calls for it to bear the greatest burden of restructuring. Analysts believe that this pressure influenced Yeocheon NCC’s latest decision. It is also reported that LG Chem, located in the Yeosu Industrial Complex, has agreed with GS Caltex to halt operations at LG Chem’s oldest first plant (1.2 million tons).

If LG Chem follows Yeocheon NCC in agreeing to reduce ethylene production, the total reduction could reach up to 3.88 million tons, surpassing the upper end of the reduction target of 3.7 million tons set by the government and industry. Previously, at the Daesan Industrial Complex in Seosan, South Chungcheong Province, HD Hyundai Chemical and Lotte Chemical decided to reorganize through a joint venture and shut down Lotte Chemical’s 1.1 million-ton NCC. In the Ulsan Industrial Complex, the closure of SK Geocentric’s ethylene facility (660,000 tons) is also being considered. A government official stated, “It is difficult to make a definitive assessment before the restructuring plan is officially submitted,” but added, “Restructuring should be carried out in a way that maximizes synergies across the entire industry.”

There is also growing interest in restructuring discussions at the Ulsan Industrial Complex. In Ulsan, SK Geocentric and Korea Petrochemical Ind. Co., Ltd. each operate only one NCC plant, and S-Oil has significantly improved its price competitiveness over conventional NCCs through the 9 trillion won Shaheen Project. However, since focusing restructuring only on Daesan and Yeosu would inevitably raise fairness concerns, there is a prevailing view that Ulsan cannot be an exception. It is reported that discussions are centering on the closure of SK Geocentric’s facility.