The government is expected to announce as early as Dec. a restructuring plan for the Daesan petrochemical industrial complex. The government and the petrochemical industry are pushing voluntary business reorganization to overcome the crisis caused by global oversupply.
A government official said on the 26th, "We plan to hold a deliberation committee based on the business reorganization plans submitted by each complex and prepare support measures," and added, "If petrochemical corporations submit their business reorganization plans next month, we can finalize and announce the restructuring plan within the year."
In Aug., the government agreed with 10 petrochemical corporations to cut 18% to 25% of current naphtha cracking capacity (NCC). It also asked petrochemical corporations to draw up by the end of this year business reorganization plans that include strengthening competitiveness through facility reductions and a shift to high value-added products, and improving financial structures.
When corporations submit their plans, the government will convene a business reorganization deliberation committee under the Corporate Vitality Act to proceed with approval procedures, finalize support measures, and move to implementation.
In this process, after comprehensively reviewing the industry's self-rescue efforts and business feasibility, the government plans to provide a comprehensive support package, including finance, tax, research and development (R&D), and regulatory easing.
Earlier, Minister Kim Jung-kwan of the Ministry of Trade and Industry (MOTI) said, "We will respond firmly to free-riding corporations that rely only on government support without responsible self-rescue efforts or seek to enjoy only the benefits of other corporations' facility reductions."
Currently, corporations participating in the talks on voluntary business reorganization are engaged in a "game of chicken," trying to avoid taking losses.
In the industry, LOTTE Chemical and HD Hyundai Chemical, which own facilities in the Daesan petrochemical complex in South Chungcheong Province, are cited as the corporations most likely to push voluntary restructuring quickly.
There is also speculation that the two companies will soon agree to a big deal to integrate petrochemical facilities in the complex.
According to the industry, LOTTE Chemical will transfer its naphtha cracking center (NCC) at the Daesan plant to HD Hyundai Chemical through an in-kind contribution, and HD Hyundai Chemical will establish a joint venture through a cash contribution. It is said that a plan is under review in which LOTTE Chemical and HD Hyundai Chemical then split the joint venture's equity.
An industry official said, "Talks are still underway, and once an agreement is reached, it will be submitted to the government."
The government also plans to prepare support measures to resolve issues under the Fair Trade Act. The current Fair Trade Act prohibits combinations when a corporate combination results in the No. 1 market share corporation and there are concerns that market competition will be restricted.
A government official said, "Corporations have strong interest in issues related to the Fair Trade Act," adding, "The Ministry of Trade and Industry (MOTI) and the Fair Trade Commission are in discussions regarding the relevant statutes."