10 Petrochemical Companies in South Korea Signed Business Restructuring Agreements
2025-8-26
On August 20th, 10 major petrochemical companies in South Korea signed agreements on business restructuring, including significant reductions in petrochemical production capacity.
According to Yonhap News Agency, on the 20th, South Korean Deputy Prime Minister for Economy and Minister of Planning and Finance, Choi Sang-mok, presided over a meeting of relevant department heads on strengthening industrial competitiveness with the theme of the petrochemical industry, calling for actions against the petrochemical industry which is facing crisis due to global oversupply and weakened competitiveness.
Regardless of signs of oversupply in the global petrochemical industry, South Korean companies are increasing production capacity and even missing opportunities to create high added value, thus facing difficulties. Only by reducing overcapacity and fundamentally improving competitiveness can we overcome the crisis.
He calls on the industry to proactively and quickly develop specific restructuring plans, and promises that the government will not stand idly by and take on its due responsibilities.
According to the South Korean newspaper JoongAng Ilbo, 10 large petrochemical companies signed business restructuring agreements, promising to strive to reduce 3.7 million tons of naphtha cracking (NCC) production capacity, equivalent to 25% of South Korea¡äs total production capacity (14.7 million tons).
The structural adjustment of the petrochemical industry proposed by the South Korean government has three focuses: reducing overcapacity and shifting towards higher value-added products, improving the financial health of comapnies and minimizing the impact on the economy and employment.
The South Korean government requires 10 companies to submit detailed plans by the end of 2025. South Korea has clearly stated the principle of "self-rescue before government assistance". This means that if the industry takes the initiative to reduce production, pursue mergers and acquisitions and integrate facilities, the government will support this action with policies such as deregulation, finance, and taxation.
In the context of oversupply and a significant decline in profit margins caused by the continuous increase in production capacity, the South Korean petrochemical industry is facing its most severe survival crisis in recent years.
For example, the Lichuan Naphtha Cracking Center received 200 billion Korean won in funding from its two major shareholders, Hanhua Group and DL Group, in March 2025. Less than six months later, it requested an additional 300 billion Korean won in assistance. Due to excessive reliance on stable ethylene production, the company has suffered consecutive losses since 2022, with a cumulative loss of KRW 820 billion.
Crisis is not an isolated case. In the Ulsan Industrial Park in South Korea where petrochemical companies are concentrated, the operating rate went down from 87% in 2021 to 78.5% in 2024 and even to around 60% this year.
A report released by Boston Consulting Group (BCG) warns that if the downturn in the petrochemical industry continues, half of South Korean companies will be unable to sustain operations within three years. To maintain the entire industry, South Korea must reduce domestic production capacity by 24%.
According to Yonhap News Agency, on the 20th, South Korean Deputy Prime Minister for Economy and Minister of Planning and Finance, Choi Sang-mok, presided over a meeting of relevant department heads on strengthening industrial competitiveness with the theme of the petrochemical industry, calling for actions against the petrochemical industry which is facing crisis due to global oversupply and weakened competitiveness.
Regardless of signs of oversupply in the global petrochemical industry, South Korean companies are increasing production capacity and even missing opportunities to create high added value, thus facing difficulties. Only by reducing overcapacity and fundamentally improving competitiveness can we overcome the crisis.
He calls on the industry to proactively and quickly develop specific restructuring plans, and promises that the government will not stand idly by and take on its due responsibilities.
According to the South Korean newspaper JoongAng Ilbo, 10 large petrochemical companies signed business restructuring agreements, promising to strive to reduce 3.7 million tons of naphtha cracking (NCC) production capacity, equivalent to 25% of South Korea¡äs total production capacity (14.7 million tons).
The structural adjustment of the petrochemical industry proposed by the South Korean government has three focuses: reducing overcapacity and shifting towards higher value-added products, improving the financial health of comapnies and minimizing the impact on the economy and employment.
The South Korean government requires 10 companies to submit detailed plans by the end of 2025. South Korea has clearly stated the principle of "self-rescue before government assistance". This means that if the industry takes the initiative to reduce production, pursue mergers and acquisitions and integrate facilities, the government will support this action with policies such as deregulation, finance, and taxation.
In the context of oversupply and a significant decline in profit margins caused by the continuous increase in production capacity, the South Korean petrochemical industry is facing its most severe survival crisis in recent years.
For example, the Lichuan Naphtha Cracking Center received 200 billion Korean won in funding from its two major shareholders, Hanhua Group and DL Group, in March 2025. Less than six months later, it requested an additional 300 billion Korean won in assistance. Due to excessive reliance on stable ethylene production, the company has suffered consecutive losses since 2022, with a cumulative loss of KRW 820 billion.
Crisis is not an isolated case. In the Ulsan Industrial Park in South Korea where petrochemical companies are concentrated, the operating rate went down from 87% in 2021 to 78.5% in 2024 and even to around 60% this year.
A report released by Boston Consulting Group (BCG) warns that if the downturn in the petrochemical industry continues, half of South Korean companies will be unable to sustain operations within three years. To maintain the entire industry, South Korea must reduce domestic production capacity by 24%.