{"id":42714,"date":"2025-08-20T11:38:05","date_gmt":"2025-08-20T11:38:05","guid":{"rendered":"https:\/\/quickassetsmarket.com\/index.php\/2025\/08\/20\/why-south-koreas-petrochemical-industry-faces-major-restructuring\/"},"modified":"2025-08-20T11:38:05","modified_gmt":"2025-08-20T11:38:05","slug":"why-south-koreas-petrochemical-industry-faces-major-restructuring","status":"publish","type":"post","link":"https:\/\/quickassetsmarket.com\/index.php\/2025\/08\/20\/why-south-koreas-petrochemical-industry-faces-major-restructuring\/","title":{"rendered":"Why South Korea\u2019s petrochemical industry faces major restructuring"},"content":{"rendered":"
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On Wednesday, government officials announced that ten South Korean petrochemical companies have reached an agreement to restructure their operations. <\/p>\n

This will involve significant reductions in their naphtha-cracking capacity, according to a Reuters report<\/a>.<\/p>\n

The South Korean government is urging its petrochemical industry, which it considers to be in “crisis,” to accelerate restructuring efforts. <\/p>\n

This push aims to enhance efficiency and improve declining profit margins.<\/p>\n

At a meeting attended by Kim Jung-kwan, the Minister of Trade, Industry and Energy, company executives signed an industry-wide restructuring agreement.<\/p>\n

Reducing naphtha-cracking capacity<\/h2>\n

The ministry announced that companies have agreed to cut their annual naphtha-cracking capacity by 2.7 million to 3.7 million metric tons. <\/p>\n

This reduction could amount to as much as 25% of the country’s total annual capacity of 14.7 million tons, based on Reuters’ calculations.<\/p>\n

The ministry further announced that companies must submit a plan outlining their proposed cuts by year-end.<\/p>\n

“The key for overcoming this crisis is clear – reducing capacity and restoring fundamental competitiveness,” Finance Minister Koo Yun-cheol said in a statement.<\/p>\n

He attributed the petrochemical industry’s misstep to two factors: enabling overcapacity and neglecting to transition towards the production of higher-value goods.<\/p>\n

Additionally, he announced that the government plans to relax regulations and provide financial and tax assistance to companies actively working towards their own recovery.<\/p>\n

Koo stated that authorities would not tolerate “free riders” who expected government assistance without making efforts to restructure.<\/p>\n

As a major global importer of naphtha, South Korea plays a significant role in the oil markets. <\/p>\n

Naphtha, an oil product, is crucial for producing chemicals used in plastics across various industries such as automotive, electronics, clothing, and construction. <\/p>\n

Therefore, any reduction in South Korea’s naphtha processing capacity could have repercussions on global oil markets.<\/p>\n

Restructuring<\/h2>\n

According to Hwang Kyu-won, an analyst at Yuanta Securities Korea, companies will be unable to avoid pressure to act due to the government’s leadership in the plan and its connection of financial support to restructuring.<\/p>\n

Hwang was quoted in the report:<\/p>\n

\n

The targets should be debt-ridden companies or those running very old facilities. The government may pressure them to merge with each other.<\/p>\n<\/blockquote>\n

South Korea boasts several prominent petrochemical companies, with LG Chem leading the production of ethylene and propylene. <\/p>\n

Other major players in the industry include GS Caltex, Lotte Chemical, Hanwha TotalEnergies, S-Oil, and HD Hyundai Chemical.<\/p>\n

South Korean petrochemical company Yeochun NCC Co is reportedly facing significant financial difficulties, with media outlets highlighting concerns over its ability to repay 180 billion won ($130 million) in loans maturing in August. <\/p>\n

The company is currently operating at a loss.<\/p>\n

“Restructuring efforts shouldn’t be overly challenging,” stated Chua Sok Peng, LSEG’s lead analyst for LPG and petrochemicals, “as the necessity to undertake these changes for survival amidst the overcapacity crisis is widely acknowledged.”<\/p>\n

South Korea’s petrochemical industry last underwent a major restructuring in 1999, during the Asian Financial Crisis, which led to the creation of YNCC.<\/p>\n

On Wednesday, the industry ministry announced the Korean government’s three goals for restructuring: reducing overcapacity and facilities, improving company finances, and minimising the impact on local economies and jobs.<\/p>\n

The government announced its intention to simultaneously restructure three industrial complexes within the country and provide a support package for the industry.<\/p>\n

Declining profits<\/h2>\n

Petrochemical companies globally, including in South Korea, have experienced a significant decline in profit margins. <\/p>\n

This downturn is attributed to a global oversupply of products, largely driven by substantial capacity expansions over the past decade, especially in China, the world’s largest petrochemical market. <\/p>\n

Additionally, demand has remained weak for the last four years.<\/p>\n

Global petrochemical margins are not anticipated to recover until 2027, according to analysts.<\/p>\n

In the first half of this year, South Korea’s petrochemical product exports decreased by 11.1% compared to the previous year, totalling $21.7 billion. This decline is attributed to falling prices and a global oversupply.<\/p>\n

The post Why South Korea’s petrochemical industry faces major restructuring<\/a> appeared first on Invezz<\/a><\/p>\n

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On Wednesday, government officials announced that ten South Korean petrochemical companies have reached an agreement to restructure their operations.  This will involve significant reductions in their naphtha-cracking capacity, according to a Reuters report. The South Korean government is urging its petrochemical industry, which it considers to be in “crisis,” to accelerate restructuring efforts. This push <\/p>\n","protected":false},"author":1,"featured_media":42715,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-42714","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"_links":{"self":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts\/42714","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/comments?post=42714"}],"version-history":[{"count":0,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts\/42714\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/media\/42715"}],"wp:attachment":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/media?parent=42714"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/categories?post=42714"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/tags?post=42714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}