The petrochemical industry has signed a voluntary agreement to reorganize business operations, agreeing to reduce current naphtha cracking center (NCC) by 18% to 25%. The industry also plans to develop a restructuring strategy by the end of this year, including facility reductions and a shift towards high value-added products to strengthen competitiveness and improve financial structure.
According to the Ministry of Trade, Industry and Energy on the 20th, the ministry and 10 petrochemical corporations held the 'Voluntary Agreement Ceremony for Business Reorganization to Revitalize the Petrochemical Industry' at the Korea Chamber of Commerce and Industry in the afternoon. During the agreement ceremony, the industry decided to reflect the results of the autonomous consulting from the industry and reduce the NCC by 2.7 million to 3.7 million tons, while preparing individual business reorganization plans by the end of the year.
The government plans to review the feasibility and self-restructuring efforts of the business reorganization plans submitted by the industry in the future and prepare a package that includes support for finance, tax, research and development, and regulatory relief. Minister Kim Jeong-kwan emphasized, "We will respond decisively to corporations that rely solely on government support without responsible self-efforts or exploit the benefits of facility reductions from other companies."
During a meeting of relevant ministers to strengthen industrial competitiveness held that day, the government also confirmed the direction and principles for promoting restructuring in the petrochemical industry. The government proposed three major directions for restructuring: ▲reducing excess capacity and shifting to specialty products with high added value ▲ensuring financial soundness ▲minimizing the impact on the local economy and employment. Additionally, the 'three principles of government support' were also confirmed: simultaneous restructuring of three petrochemical industrial complexes, sufficient self-efforts and the preparation of feasible business reorganization plans, and the preparation of a comprehensive government support package.
The government will also implement measures to mitigate the economic and employment shocks. Previously, the government designated Yeosu as a preemptive response area for industrial crises in May and is reviewing the additional designation of Seosan. The Ministry of Employment and Labor plans to provide employment maintenance support funds and loan for living stabilization for Yeosu, which has been designated as an employment crisis response area.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol noted to the petrochemical industry, "You cannot overcome the crisis with a complacent attitude of 'just endure' or 'as long as we can avoid the downpour'," and requested, "Please approach this with the resolve of 'death is life (死卽生)'." He emphasized, "Please present your plans for business reorganization and strengthening competitiveness with a sense of urgency, even by next month if necessary."
However, some point out that this reorganization may not yield practical effects. There has been no announcement of specific restructuring measures, and the government's proposed order of 'first self-effort, then government support' is considered vague. The absence of a set deadline for reductions decreases the likelihood of rapid business restructuring, and there are concerns that the lack of definitive reduction targets could increase conflicts among corporations.
In response, Lee Seung-ryeol, head of the Industrial Policy Office at the Ministry of Trade, Industry and Energy, stated, "Once corporations prepare their business reorganization plans, it is the government's turn to clarify appropriate support measures," and said, "We will do our best to ensure that the support package is executed swiftly." He also explained, "Given that the situations of each corporation are different and their directions for business reorganization vary, uniform support is not appropriate," adding, "We will propose financial, tax, research and development, and regulatory relief measures tailored to each corporation."