In fight for survival, petrochemical firms fight key solution — restructuring

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In fight for survival, petrochemical firms fight key solution — restructuring

Published: 04 Sep. 2025, 12:01 Updated: 15 Sep. 2025, 13:07

Audio report: written by reporters, read by AI

A view of Yeochun NCC, a petrochemical company in the Yeosu Industrial Complex in South Jeolla Province, which is struggling with financial difficulties [NEWS1]

Corporate restructuring is often described as “bone-cutting,” underscoring how painful and difficult the process can be — especially when multiple stakeholders with conflicting interests are involved.

Nevertheless, the government has decided to once again leave petrochemical industry restructuring to the companies themselves, more than a year after shelving earlier plans. With each firm facing different circumstances and survival strategies, the road to restructuring is expected to be arduous.

A JoongAng Ilbo survey of 10 domestic petrochemical companies, conducted on condition of anonymity, found that only four listed “restructuring including plant shutdowns” among their top three priorities.

The 10 companies — LG Chem, Lotte Chemical, SK Geo Centric, Hanwha TotalEnergies, Daelim Industrial Chemical (DL), GS Caltex, Hanwha Solutions, HD Hyundai Chemical, Korea Petrochemical and S-Oil — are the same firms that signed voluntary agreements under the government’s “Petrochemical Industry Revitalization Plan” announced on Aug. 20.

The plan calls for cutting up to 25 percent of Korea’s annual ethylene production, or 3.7 million tons.

Restructuring, in practice, means plant shutdowns and job cuts. But six of the 10 firms did not list it as a priority.

While companies have formally pledged to consider measures such as reducing naphtha cracking capacity, consolidating facilities with competitors and integrating operations with refiners, in reality, they plan to keep running their own plants. This conflicts with the government’s stated principle of supporting voluntary restructuring while excluding “free riders” that avoid painful decisions.

A view of the Daesan Petrochemical Complex in South Chungcheong, home to major petrochemical firms including LG Chem, Lotte Chemical and HD Hyundai Chemical [YONHAP]

Industry insiders are skeptical that a voluntary approach will succeed.

“At this point, a company either has to abandon its core business entirely or merge with a competitor — it’s a matter of survival,” said an executive at one petrochemical firm. “It’s unrealistic to expect companies to work this out on their own when each is locked in a competitive struggle.”

Another noted the stark differences between companies.

"Some have parent groups firmly committed to petrochemicals, some have backing from refiners, some depend almost entirely on naphtha cracking center [NCC] operations, some have ample financial reserves and others would exit the business tomorrow if they could," the executive said. "If there’s even a slim chance of hanging on, no one will be the first to shut down their own plant."

Decision-making capacity also varies. Companies with independent ownership structures, such as LG Chem and SK Geo Centric, can move quickly. But joint ventures such as GS Caltex, comprising GS Energy and Chevron; Hyundai Chemical, comprising HD Hyundai Oilbank and Lotte Chemical; Yeochun NCC, comprising Hanwha Solutions and DL; and Hanwha TotalEnergies, comprising Hanwha Impact and TotalEnergies; face far more complex negotiations. S-Oil, majority-owned by Saudi Aramco, is instead pursuing an expansion of its petrochemical business.

Despite mounting losses, some companies that have already idled plants did not list restructuring as a top priority. Three companies did not include cutting NCC capacity — the very measure the government considers most urgent — among their key tasks.

China National Petroleum Corporation (CNPC)'s Dalian Petrochemical Corp refinery is seen near the downtown of Dalian in Liaoning province, China on July 17, 2018. [REUTERS/YONHAP]

Another three, despite lacking refineries within their groups, listed vertical integration with refiners as their top priority.

One area of consensus is the need to move away from commodity products. Nine of the 10 firms listed "development of high-value-added products" as a priority, recognizing that business models built on bulk production are no longer sustainable.

But for an industry built over decades around large conglomerates, voluntary mergers and facility consolidation are unlikely to be implemented at scale.

Yeochun NCC, for example, recently saw disputes between major shareholders escalate to the point of rumors of insolvency. Industry observers believe there may be a few symbolic cases of consolidation, but large-scale restructuring is improbable.

The government’s announcement last month did not include detailed measures or specific support plans. Many warn that it must take a more active role before it is too late.

“Restructuring depends on speed and liquidity,” said Choi Chang-yoon, a partner at Samil PwC. “Stronger regulatory relief and cash incentives are needed if restructuring is to produce results quickly.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM KI-HWAN,KIM SU-MIN [[email protected]]