[Edaily Reporter Park Sun-Yeop ] An analysis suggests that the restructuring of South Korea’s petrochemical industry has moved beyond the planning stage and entered a phase of actual plant shutdowns and corporate mergers. With the business reorganization plan for the Yeosu Industrial Complex finalized following that of Daesan, the scale of domestic naphtha cracking facility (NCC) reductions is expected to expand to 2.49 million metric tons.

Lee Jin-myung, a senior researcher at Shinhan Investment Securities, stated in a report on the 23rd, “The Yeosu business reorganization is significant in that it marks a shift in the domestic petrochemical industry’s restructuring from the planning stage to the stage of actual production halts and corporate mergers.”

According to the business restructuring plan, LOTTE CHEMICAL CORPORATION(011170)will spin off its Yeosu NCC—with an annual capacity of 1.23 million metric tons—and its basic materials business, and then merge with Yeocheon NCC. HANWHA SOLUTIONS(009830)and DL Chemical will also contribute their downstream assets, such as polyethylene (PE), as in-kind capital.
Following the merger, LOTTE CHEMICAL CORPORATION, HANWHA SOLUTIONS, and DL CHEMICAL will establish a joint control structure in which each holds one-third of the shares in the newly formed entity. Facilities totaling 1.39 million metric tons—including Yeocheon NCC Plant 2 (920,000 metric tons) and Plant 3 (470,000 metric tons)—will be shut down for at least three years, and operations at general-purpose downstream facilities will also be scaled back.
HANWHA SOLUTIONS and DL Chemical will each raise 272.5 billion won through capital increases. The government also plans to provide a support package worth over 700 billion won, covering areas such as finance, import insurance, tax incentives, and research and development (R&D).
With this restructuring, the total domestic NC production suspension—combining 1.1 million metric tons in Daesan and 1.39 million metric tons in Yeosu—will reach 2.49 million metric tons. This represents 67–92% of the government’s proposed reduction target of 2.7 million to 3.7 million metric tons.
It is also noteworthy that, unlike simple production cuts that merely lower plant utilization rates, this initiative involves integrating facilities and jointly managing raw materials, utilities, and logistics. The explanation is that this will improve cost competitiveness by increasing the utilization rates of the remaining facilities and reducing the burden of fixed costs.
While reducing the production of commodity products, the industry is also pursuing the upgrading of its product portfolio. It plans to invest 150 billion won in high-value-added products such as medical-grade low-density polyethylene (LDPE) and polyolefin elastomers (POE) for adhesives and sealants.
However, considering the ongoing capacity expansions by Chinese companies and geopolitical risks, the petrochemical market is not expected to normalize in the short term. Senior Researcher Lee stated, “Since a long-term shutdown of more than three years has been explicitly announced, this restructuring focuses on structural supply reduction rather than responding to short-term market conditions,” adding, “In the medium to long term, we expect a balance between supply and demand and improved cost competitiveness for domestic companies.”
He further predicted, “If the cutbacks expand to include additional business restructurings in Ulsan and Yeosu, the excessive structural discount that has been applied to the chemical sector will gradually ease.”