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New Straits Times
3 days ago
- Business
- New Straits Times
South Korea to announce plan to restructure petrochemical sector facing 'grave' situation
SEOUL/NEW DELHI: South Korea's government will announce a plan this month to restructure the country's petrochemical sector, which is in a "grave" situation, Industry Minister Kim Jung-kwan said on Thursday. South Korean petrochemical companies must take lessons from the restructuring of the country's shipbuilding industry in the late 2010s, when shipmakers had to liquidate assets and streamline business areas amid a sharp drop in orders, Kim said. Margins have plunged for petrochemical companies in South Korea and across the globe due to an oversupply of products caused by relentless capacity additions in the last decade, particularly in China, the biggest petrochemical market. Demand has also been sluggish over the last three to four years. "A restructuring in the petrochem industry has been highly expected, given the industry is running merely 80 per cent of total capacity in Korea now - meaning we have about a 20 per cent glut here," said Hwang Kyu-won, an analyst at Yuanta Securities Korea. Kim, who was speaking at a shipyard, said the petrochemical industry needed to take voluntary measures, including the "adjustment" of facilities, his ministry quoted him as saying. There have been concerns as well over the financial health of South Korea's loss-making Yeochun NCC Co (YNCC), a Yeosu-based petrochemical maker that local media says faces 180 billion won (US$130 million) in loans coming due at the end of August. South Korea's government can use YNCC's travails as an opportunity for a large-scale restructuring in the industry, said the analyst Hwang. Analysts say the industry does not expect global petrochemical margins to recover before 2027. The last major restructuring for South Korea's petrochemical industry was in 1999 during the Asian Financial Crisis, when YNCC was formed. President Lee Jae Myung, who took office after a snap election in June, pledged during his campaign to pursue tax support for mergers and acquisitions in the petrochemical industry, and to exempt companies from antitrust regulations to allow more coordination of production and operations. South Korea's exports of petrochemical products stood at US$21.7 billion in the first half of this year, down 11.1 per cent from a year earlier, amid price declines and global oversupply. Total exports of petrochemical products were US$48 billion in 2024, accounting for 7 per cent of South Korea's total exports and a top-five export item after semiconductors, automobiles, machinery and petroleum products. South Korea is one of the world's largest importers of naphtha, a derivative of crude oil that is refined into chemical products used in plastics for automobiles, electronics, clothing and construction. If the country is forced to cut capacity, it could impact global oil markets. Other South Korean petrochemical companies besides YNCC are also seeing asset reshuffling. HD Hyundai is looking to acquire Lotte Chemical's naphtha cracker, or the companies may merge their cracker operations, trade sources have said. HD Hyundai said nothing has been decided yet.
Business Times
3 days ago
- Business
- Business Times
South Korea to announce plan to restructure petrochemical sector facing ‘grave' situation
[SEOUL] South Korea's government will announce a plan this month to restructure the country's petrochemical sector, which is in a 'grave' situation, Industry Minister Kim Jung Kwan said on Thursday. South Korean petrochemical companies must take lessons from the restructuring of the country's shipbuilding industry in the late 2010s, when shipmakers had to liquidate assets and streamline business areas amid a sharp drop in orders, Kim said. Margins have plunged for petrochemical companies in South Korea and across the globe due to an oversupply of products caused by relentless capacity additions in the last decade, particularly in China, the biggest petrochemical market. Demand has also been sluggish over the last three to four years. 'A restructuring in the petrochem industry has been highly expected, given the industry is running merely 80 per cent of total capacity in Korea now - meaning we have about a 20 per cent glut here,' said Hwang Kyu Won, an analyst at Yuanta Securities Korea. Kim, who was speaking at a shipyard, said the petrochemical industry needed to take voluntary measures, including the 'adjustment' of facilities, his ministry quoted him as saying. There have been concerns as well over the financial health of South Korea's loss-making Yeochun NCC Co (YNCC), a Yeosu-based petrochemical maker that local media says faces 180 billion won (S$166.4 million) in loans coming due at the end of August. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up South Korea's government can use YNCC's travails as an opportunity for a large-scale restructuring in the industry, said the analyst Hwang. Analysts say the industry does not expect global petrochemical margins to recover before 2027. The last major restructuring for South Korea's petrochemical industry was in 1999 during the Asian Financial Crisis, when YNCC was formed. President Lee Jae Myung, who took office after a snap election in June, pledged during his campaign to pursue tax support for mergers and acquisitions in the petrochemical industry, and to exempt companies from antitrust regulations to allow more coordination of production and operations. South Korea's exports of petrochemical products stood at US$21.7 billion in the first half of this year, down 11.1 per cent from a year earlier, amid price declines and global oversupply. Total exports of petrochemical products were US$48 billion in 2024, accounting for 7 per cent of South Korea's total exports and a top-five export item after semiconductors, automobiles, machinery and petroleum products. South Korea is one of the world's largest importers of naphtha, a derivative of crude oil that is refined into chemical products used in plastics for automobiles, electronics, clothing and construction. If the country is forced to cut capacity, it could impact global oil markets. Other South Korean petrochemical companies besides YNCC are also seeing asset reshuffling. HD Hyundai is looking to acquire Lotte Chemical's naphtha cracker, or the companies may merge their cracker operations, trade sources have said. HD Hyundai said nothing has been decided yet. REUTERS
Reuters
19-05-2025
- Business
- Reuters
Asian petrochemical producers chase ethane gains as margins dwindle
NEW DELHI, May 19 (Reuters) - Several petrochemical producers in Asia plan to reconfigure their crackers to process more ethane to reduce costs and capitalise on rising U.S. supplies as they face thin margins and global oversupply, company executives said. These include South Korea's largest cracker operator YNCC and SP Chemicals in China. In Japan, Mitsui Chemicals is studying the use of ethanol at existing crackers. The change will allow operators to keep their feedstocks flexible with U.S. ethane exports forecast to rise by about 7% in 2025. Ethane, a byproduct of shale gas, is typically cheaper than the more widely used naphtha. South Korea's YNCC is re-evaluating its investment plans to improve cost efficiency at its crackers, which have been running at minimum utilisation rates of 70–80% so far this year, its CEO You-Jin Lee said at the Asia Petrochemical Industry Conference (APIC) in Bangkok last week. "One of the ways we can do it is by increasing (the) use of ethane," said Lee. In China, SP Chemicals is studying plans to increase ethane use at its petrochemical complex in eastern China's Jiangsu province to up to 90% from 75%. "Flexible crackers will ultimately be the fittest to survive when margins are plunging," said a source at an east-China naphtha cracker who declined to be named because they were not authorised to speak to the media. "New entrants into the market will want to import cheap U.S. ethane," Armaan Ashraf, global head of natural gas liquids, at consultancy FGE, said, referring to petrochemical projects in the Middle East, Russia and Asia. Thailand's PTT Global Chemical will begin to use U.S.-ethane as an alternative feedstock at its petrochemical complex, securing 400,000 tons annually starting in 2029, the company said in a report released at APIC. In Europe, where global chemical giants have announced closures due to high operating costs and weak margins, INEOS is building a 1.45 million tons per year cracker, the U.S. Energy Information Administration said in its May 6 report. EIA expects this project to utilise up to 75,000 barrels per day of ethane when it comes online in mid-2026. Other importers, such as India, will have to build infrastructure including storage and ships to boost the use of ethane at their plants, an Indian industry source said. For example, ONGC ( opens new tab is seeking partners to build large ethane carriers to ship in 800,000 metric tons per year from May 2028 for its western India petrochemical plant. EIA expects U.S. ethane production to rise to a new record 3.1 million bpd in 2026 from 2.9 million bpd in 2025. This will increase U.S. exports to 540,000 bpd in 2025 and 640,000 bpd in 2026, EIA said. EIA expects Wanhua Chemical's newly started cracker in eastern China's Yantai city, which can process ethane or naphtha, to add 50,000-75,000 bpd of U.S. ethane export demand this year.
