The combined operating losses of six domestic petrochemical companies struggling with China's oversupply of petrochemical products increased by more than 1 trillion won from a year earlier in 2024. Petrochemical companies are moving to improve their fundamentals by integrating production facilities and pushing into high value-added businesses, but many expect it will take a long time to see tangible results.
According to the industry on the 5th, the combined operating loss of six companies — SK Innovation's chemical institutional sector, S-Oil, LG Chem's petrochemical institutional sector, Lotte Chemical, Hanwha Solutions' chemical institutional sector, and Kumho Petrochemical — totaled 1.6502 trillion won last year. The combined operating loss in 2024 was 614.4 billion won.
By company, Lotte Chemical posted an operating loss of 943.6 billion won last year, and LG Chem's petrochemical institutional sector and Hanwha Solutions' chemical institutional sector also saw their deficits widen to 356 billion won and 249.1 billion won, respectively, from a year earlier.
SK Innovation's chemical business institutional sector recorded an operating loss of 236.5 billion won last year, swinging to a loss from the previous year. S-Oil's petrochemical institutional sector also turned to a loss with an operating loss of 136.8 billion won.
Kumho Petrochemical, which does not operate a naphtha cracking center (NCC), reported relatively resilient results. Kumho Petrochemical, which runs a synthetic rubber business, said last year's operating profit was 271.8 billion won, down 0.4% from a year earlier.
The domestic petrochemical industry is struggling because it has taken the "direct hit" of oversupply originating from China. Over the past 10 years, China rapidly expanded petrochemical facilities, raising its self-sufficiency rate to 80%. In particular, after the Russia-Ukraine war, Russia, unable to find export destinations due to sanctions by Western countries, sold crude oil at low prices that China imported, enabling China to supply petrochemical products in large volumes and causing domestic companies to lose price competitiveness.
The government carried out a restructuring of the petrochemical industry at the end of last year, but it appears it will take a long time for the effects to show. That is because complex processes remain, including establishing integrated corporations within the same petrochemical complex, improving facility efficiency, and streamlining operating systems.
The petrochemical industry plans to reduce production of general-purpose products and increase the share of high value-added products to counter China's offensive.
As part of expanding specialties, Lotte Chemical plans to increase the number of production lines at the compounding plant in the Yulchon Industrial Complex in South Jeolla Province from the current 11 to 23 by year-end. SK Innovation said it will maximize profitability across the liquefied natural gas (LNG) value chain to improve profitability.
LG Chem said it will secure future growth engines for each business institutional sector — petrochemicals, advanced materials, and life sciences — and shift to a high value-added industrial structure. Hanwha Solutions plans to reorganize its business around eco-friendly energy.
S-Oil said it will improve its performance through the Shaheen Project, a large-scale petrochemical complex under construction in Ulsan. As part of the government-led restructuring of the petrochemical industry, the Ulsan Industrial Complex is in a situation where it must draw up a plan to reduce ethylene production capacity, but S-Oil's position is that it will not include the Shaheen Project in discussions on reducing ethylene facilities.