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Korea's larget petrochemical complex to begin major restructuring as industry pressures rise

Published: 20 Mar. 2026, 18:25 Updated: 20 Mar. 2026, 19:39

Petrochemical facilities are seen at the Yeosu Industrial Complex in South Jeolla on March 9. [YONHAP]

The Yeosu Industrial Complex in South Jeolla, Korea’s largest petrochemical hub, is set to enter a major restructuring phase as leading firms move to consolidate operations and cut excess capacity.

Lotte Chemical, Yeochun NCC, Hanwha Solutions and DL Chemical have submitted a joint restructuring plan to integrate their naphtha cracking centers (NCC) and downstream facilities in Yeosu, the Ministry of Trade, Industry and Resources said Friday.

The companies submitted a final restructuring plan for what is being called the Yeosu Project No. 1, marking the second industry-led reorganization following the government’s push for reform in August last year.

Yeochun NCC is a joint venture operated by Hanwha Solutions and DL Chemical. Lotte Chemical and Yeochun NCC have also applied to the Fair Trade Commission for a preliminary review of their proposed business combination.

The core of the restructuring plan is to integrate each company's production processes, including NCC, polyethylene and synthetic resin facilities, to reduce excess capacity and improve efficiency.

Under the proposal, Lotte Chemical will spin off its NCC and some production facilities in Yeosu and merge them with Yeochun NCC to establish a new entity. Hanwha Solutions and DL Chemical will contribute assets such as polyethylene plants to the new company.

Once completed, the three firms will each hold a one-third stake in a jointly controlled structure. The integration is expected to create a vertically aligned system spanning basic petrochemical feedstocks such as ethylene and propylene to finished resin products.

Capacity reductions are also expected, although specific figures will be finalized after government approval.

Petrochemical company CEOs pose for a photo during a meeting at the Korea Trade-Investment Promotion Agency in Seocho District, southern Seoul, on Feb. 25. [NEWS1]

Industry sources say shutting down Yeochun NCC’s second and third plants — with capacities of 910,000 tons and 470,000 tons, respectively — is under consideration, potentially reducing annual output by about 1.4 million tons.

If implemented, the move would bring the government closer to its target of cutting NCC capacity nationwide by 2.7 million to 3.7 million tons. A previously approved restructuring project in Daesan, South Chungcheong, is expected to reduce capacity by 1.1 million tons.

The government is also encouraging a shift toward higher-value products used in automobiles and electrical wiring.

“If this restructuring succeeds, Yeochun NCC, which has struggled with a commodity-focused business model, will be able to improve efficiency and transition toward higher-value products,” Industry Minister Kim Jung-kwan said.

While restructuring has begun in Yeosu, progress remains slow among other companies in the complex, including LG Chem and GS Caltex, where consolidation talks have yet to reach an agreement.

Attention is now turning to Ulsan, another major petrochemical cluster home to SK Geo Centric, Korea Petrochemical Industry Company and S-Oil.

S-Oil is preparing to launch its Shaheen Project, which will add 1.8 million tons of new production capacity, raising concerns over imbalances as other regions cut output.

Industry Minister Kim Jung-kwan speaks during a meeting with CEOs of major petrochemical companies at the Korea Chamber of Commerce and Industry in Jung District, central Seoul, on Dec. 22, 2025. [NEWS1]

“It is a contradictory situation where production is being reduced elsewhere while S-Oil is increasing output,” an industry official said. “How the government addresses fairness concerns will be key.”

The government will determine whether to approve the restructuring plan after a review. If approved, it plans to provide tailored support, including tax benefits, financing, research and development support, cost reductions and regulatory easing.

The petrochemical industry is facing growing pressure amid rising naphtha prices and supply instability linked to conflicts in the Middle East. Some companies, including Yeochun NCC, have already declared force majeure to clients.

The government has designated naphtha as a strategic economic security item and pledged support to stabilize supply chains.

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 AHN HYO-SEONG, NAM YOON-SEO [[email protected]]