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 (Aug 14).
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 DL Holdings said in a regulatory filing on Thursday its subsidiary DL Chemical Co will issue a 150 billion won (US$108.38 million) loan to YNCC, in which it holds a major stake.
YNCC did not respond to phone calls seeking comment.
South Korea’s government can use YNCC’s travails as an opportunity for a large-scale restructuring in the industry, said the analyst Hwang.
