The government has decided to provide support after reviewing the self-rescue efforts if the petrochemical industry, which is struggling due to oversupply from China, prepares a business restructuring plan. As the framework of 'self-rescue efforts first, government support later' takes shape, there are evaluations that restructuring will gain momentum.
On the afternoon of the 20th, the Ministry of Trade, Industry and Energy and 10 petrochemical corporations held a 'Voluntary Agreement Ceremony for the Resurgence of the Petrochemical Industry' at the Korea Chamber of Commerce and Industry in Seoul, agreeing to reduce the scale of naphtha cracking facilities (NCC) to between 2.7 million and 3.7 million tons and to prepare individual corporate restructuring plans by the end of the year. The planned reduction corresponds to 18-25% of the total production capacity of 14.7 million tons.
Participants in the ceremony included LG CHEM, LOTTE Chemical, SK Geocentric, Hanwha Total, Korea Petrochemical Ind., Hanwha Solutions, DL Chemical, GS Caltex, HD Hyundai, and S-Oil.
At the meeting of the Ministers for Strengthening Industrial Competitiveness, the government confirmed the 'three principles of government support': simultaneous promotion of restructuring in three petrochemical industrial complexes (Ulsan, Yeosu, Daesan), sufficient self-rescue efforts and preparation of feasible restructuring plans, and the establishment of a comprehensive government support package. Additionally, it set three major directions for the restructuring of the petrochemical industry: reduction of excess facilities and transition to high-value products, securing financial soundness, and minimizing the impact on the local economy and employment.
The petrochemical industry must submit their restructuring plans to the government by the end of the year. It is also possible for 1-2 corporations or 3-4 corporations to prepare business restructuring plans together. The company that submits its restructuring plan first will receive support first, fostering competition.
A representative from the petrochemical industry said, 'Until now, there were companies that were hoping the government would save them and just holding on,' and noted, 'As the scope of reducing NCC and the timeline within the year have been presented, some clarity has been achieved in the direction.'
Another representative from the petrochemical sector also said, 'Asking the industry to autonomously restructure is not significantly different from before, but until now, it was difficult to mention the word mergers and acquisitions (M&A), but we can now discuss restructuring.'
There are also prospects that integration among corporations, NCC facility reductions, and mergers between oil refining companies and petrochemical firms centered around the three petrochemical industrial complexes will not be easy. Even if there is agreement on the broader direction of reducing NCC, the revenue of corporations will vary depending on which company's facilities are halted first.
An industry official remarked, 'There are also discussions about reducing facilities, prioritizing those companies that only have NCC facilities or have older installations.'