The government decided to push ahead with the "Yeosu No. 1 business restructuring project," which will integrate the Yeosu operations of Hanwha Solutions, DL Chemical and Lotte Chemical around Yeochun NCC and reduce production facilities. It also prepared a support package worth more than 700 billion won, including financing, tax breaks and regulatory easing. Earlier, on Feb. the government approved the "Daesan project," involving HD Hyundai Oilbank and Lotte Chemical, as the first case of business restructuring.
The Ministry of Trade, Industry and Energy on the 22nd released "Status of the Yeosu No. 1 business restructuring project and support package." The project follows the government's petrochemical industry restructuring direction announced last year, with four corporations participating: Yeochun NCC, Hanwha Solutions, DL Chemical and Lotte Chemical.
Under the restructuring plan, Hanwha Solutions and DL Chemical will contribute in kind their downstream (D/S) businesses such as polyethylene (PE) to Yeochun NCC. Lotte Chemical will spin off its Yeosu naphtha cracking center (NCC) and basic materials business into a new company and then merge it with Yeochun NCC.
Facility reductions will proceed in parallel. Yeochun NCC will halt operation of two NCC units—the No. 2 unit with an annual capacity of 920,000 tons and the No. 3 unit with a capacity of 470,000 tons. It also plans to gradually scale down general-purpose downstream facilities over the business restructuring period of three years or more.
Major shareholders DL Chemical and Hanwha Solutions will conduct a paid-in capital increase of 545 billion won, 272.5 billion won each, to improve Yeochun NCC's financial structure. This will be used to repay Yeochun NCC's liability. They will also invest a total of 253.2 billion won to strengthen competitiveness after the restructuring. Of the investment, 103.2 billion won will go to building supply chain piping and operating systems, and 150 billion won will be used for switching to high-value products such as medical-grade LDPE and POE.
To ease the funding burden arising during the restructuring process, the government has arranged a financing and tax support package worth more than 700 billion won. Through the state-run Korea Development Bank and others, it will supply up to 450 billion won in new funds and defer repayment of agreement debts until the end of 2029 in light of the restructuring period. The Korea Trade Insurance Corporation will offer up to a 30% discount on import insurance premiums for corporations undergoing restructuring and provide import financing loan guarantees totaling 200 billion won.
Tax support will also be expanded. The government will seek to ease corporate tax burdens and expand reductions of registration and acquisition taxes during partitioning and mergers, and will clarify the application of tax deferral for qualifying mergers when overlapping facilities are shut down. To secure cost competitiveness, it will extend duty-free treatment on imported naphtha and crude oil used to produce naphtha. Along with this, it will reduce regulatory burdens in the restructuring process by cutting rental fees for shared pipe racks, creating an integrated permitting consultative body, and streamlining procedures for corporate splits and mergers.
Support for employment and the local economy will proceed in tandem. If the employment situation in the Yeosu area worsens, the government will consider designating it as an employment crisis area, and will seek to ease requirements for employment retention subsidies and expand support for regional investment promotion grants.
Starting with the Yeosu project, the Ministry of Trade and Industry (MOTI) plans to speed up follow-up restructuring at major petrochemical industrial complexes. The government said it will continue to communicate with corporations and push additional restructuring to ease oversupply and strengthen industrial competitiveness.