Industry Minister Kim Jung-kwan urged petrochemical companies in Yeosu on Wednesday to swiftly develop voluntary restructuring plans by year-end to qualify for government support amid a global oversupply crisis. While the Daesan complex in Seosan has submitted plans to cut naphtha cracking capacity by 1.1 million tons, Yeosu and Ulsan complexes have yet to finalize details.
On Wednesday, Industry Minister Kim Jung-kwan met with executives from petrochemical companies in Yeosu, South Jeolla Province, urging them to quickly formulate voluntary restructuring plans by the end of December to access government aid addressing an industry crisis caused by global oversupply. This follows the government's August announcement of three principles for supporting the sector: simultaneous restructuring across the Seosan, Ulsan, and Yeosu complexes; sufficient self-rescue efforts and feasible plans from companies; and a comprehensive government support package.
The industry has committed to reducing naphtha cracking center (NCC) capacity by up to 3.7 million tons annually while shifting to high-value and eco-friendly products. On the same day, Lotte Chemical and HD Hyundai Chemical finalized a plan at the Daesan complex in Seosan, South Chungcheong Province, to cut NCC output by 1.1 million tons, including transferring Lotte's Daesan plant to HD Hyundai Chemical to counter oversupply from China and the Middle East and focus on higher-value products.
During a visit to LG Chem's Yeosu plant, Kim encouraged the company, which boasts top-tier R&D capabilities, to invest in high-value specialty products. He stated, "If Daesan has opened the gate for business restructuring of the petrochemical industry, Yeosu will determine the industry's fate." Kim stressed, "The deadline for submitting business restructuring plans is the end of December as previously announced by the Ministry of Trade, Industry and Resources, and there are no plans to extend this deadline. Companies that fail to meet this deadline will be excluded from government support and will have to navigate future domestic and international crises on their own."
In Yeosu, LG Chem and GS Caltex have engaged Bain & Company to explore joint operations and output reductions. In Ulsan, Boston Consulting Group is advising SK Geo Centric, S-Oil, and Korea Petrochemical Ind. Co. on cuts of at least 2.7 million to 3.7 million tons. However, S-Oil is proceeding with its Shaheen project for a new efficient plant using a thermal crude-to-chemicals process, opting out of capacity reductions.
Petrochemical firms raised concerns over the recent industrial electricity rate hike and called for a special bill to aid the industry, along with government help for U.S. investment visas. The ministry plans to soon reveal a support package including tax incentives, R&D aid, and regulatory streamlining.
