The combined operating profit of South Korea’s top four petrochemical firms — LG Chem, Lotte Chemical, Hanwha Solutions, and Kumho Petrochemical — plunged to 237.7 billion won in 2024, a staggering 94 percent decline from 4.35 trillion won in 2022.
To address the crisis, LG Chem and SK Incheon Petrochem have announced bond issuance of 600 billion won and 210 billion won, respectively. Other major players, including Hanwha TotalEnergies Petrochemical, SK Geo Centric, HD Hyundai Chemical, and Hansol Chemical, are also planning similar moves.
The industry’s troubles stem largely from the rapid expansion of rivals abroad. China, once a vital export market for South Korean firms, has doubled its ethylene production capacity to 52 million tons in 2023 from 26 million tons in 2018. It plans to add an additional 9 million tons this year, becoming a fierce competitor in Southeast Asian markets.
Meanwhile, Middle Eastern companies are leveraging advanced crude oil-to-chemicals technology, slashing production costs to one-third of South Korean levels. Adding to the pressure, Saudi Aramco is set to complete a major petrochemical complex in Ulsan next year, further encroaching on South Korea’s domestic market.
The shifting dynamics have compelled South Korea’s petrochemical giants to take extraordinary measures. Lotte Group used its iconic Lotte World Tower as collateral to secure liquidity for Lotte Chemical, while Hyosung Chemical sold its specialty gas business to affiliate Hyosung TNS for 920 billion won.
Industry experts argue that individual corporate efforts may no longer suffice. They are urging the South Korean government to step in with more aggressive restructuring measures, including differential electricity rates for petrochemical industrial complexes and support for mergers and acquisitions.
“Corporate-level restructuring has reached its limit,” said Lee Dong-gu, an honorary researcher at the Korea Research Institute of Chemical Technology. “The government must take the lead to drive structural reforms and help the industry transition to high-value-added materials and technologies.”
Copyright ⓒ Aju Press All rights reserved.
