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Petrochemical firms propose topline solutions aimed at reducing oversupply issue

Published: 20 Dec. 2025, 09:00 Updated: 21 Dec. 2025, 17:34

Industry Minister Kim Jung-kwan listens to on-site officials with LG Chem CEO Shin Hak-cheol during a visit to an LG Chem facility at the Yeosu Industrial Complex in Yeosu, South Jeolla, on Nov. 26. [MINISTRY OF TRADE, INDUSTRY AND RESOURCES]

Korea’s struggling petrochemical producers on Friday submitted self-rescue plans to the government ahead of a promised deadline, as the industry grapples with persistent oversupply. The proposals could reshape major industrial hubs in Yeosu in South Jeolla and Ulsan, with companies reportedly weighing plant closures and potential mergers.

The submissions follow similar filings last month from the Daesan industrial complex in South Chungcheong, moving the government closer to its goal of cutting up to 3.7 million metric tons of naphtha cracking center (NCC) capacity.

LG Chem on Friday submitted a restructuring proposal for its Yeosu operations to the Ministry of Trade, Industry and Resources after consultations with GS Caltex. The companies did not disclose details of the plan.

Industry insiders said the proposal is likely to include shutting down LG Chem’s No. 1 plant, also its oldest facility, in Yeosu. The plant has an annual capacity of 1.2 million tons and has been in operation for about 30 years.

Market participants have also discussed the possibility of the two companies pursuing an integrated operating structure through a joint venture.

GS Caltex said it would continue discussions with the government and LG Chem. “In line with the government’s policy direction, we will work with LG Chem to create synergies that strengthen the competitiveness of the petrochemical industry,” the company said.

Yeochun NCC, another petrochemical joint venture in the Yeosu Industrial Complex, also submitted a self-rescue plan together with Lotte Chemical.

The proposal likely includes the permanent closure of Yeochun NCC’s No. 3 plant with an annual capacity of 470,000 tons, which has remained shut since late July, as well as additional capacity reductions, according to industry insiders.

DL Chemical, a co-owner of Yeochun NCC, previously said the company should close either the larger No. 1 plant, with annual capacity of 900,000 tons, or the No. 2 plant, which can produce 915,000 tons.

Industry insiders said broader restructuring options, including possible integration with Lotte Chemical, have also been under discussion.

“It is difficult to disclose specific details, but discussions are proceeding in line with the direction presented by the government,” an industry insider said, referring to the government's push to address oversupply and weak profitability in the petrochemical sector.

“The plans submitted this time outline broad directions, and the timing and methods will be determined through further negotiations,” the source added.

In Ulsan, SK Geo Centric, S-Oil and Korea Petrochemical Ind. jointly submitted a restructuring plan after commissioning Boston Consulting Group to advise on potential restructuring. The proposal focuses on setting up a joint venture to optimize downstream operations, while decisions on specific capacity cuts and affected plants have been left for later talks.

Industry sources said the companies considered the characteristics of the Ulsan complex, including S-Oil’s Shaheen project, which is scheduled to begin commercial operations next year.

The Ministry of Trade, Industry and Resources will hold a meeting on Monday with chief executives from 10 companies, including LG Chem, Lotte Chemical, HD Hyundai Chemical and SK geo centric. The ministry plans to review the submitted proposals and discuss government support measures and next steps.

The government in August instructed petrochemical companies to submit restructuring plans by the end of the year.

An industry official said implementation would take time. “The Daesan complex already had relatively concrete plans, but Yeosu and Ulsan faced tighter deadlines,” the official said. “It could take longer for individual restructuring plans to be detailed and carried out.”

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 LEE SU-JEONG, NA SANG-HYEON [[email protected]]