Key Points

The road map for restructuring the petrochemical industry is aimed at reducing oversupply, transiting to the production of high-value specialty products, improving the fiscal health of companies and minimising the impact of the restructuring on regional economies, according to the Ministry of Trade, Industry and Energy, reports Yonhap news agency.

The government support for the restructuring plan will be provided under three principles: "simultaneous" restructuring of three petrochemical industrial complexes, "sufficient" self-rescue efforts and preparation of a "feasible" business restructuring plan by companies, and the establishment of a "comprehensive" government support package, the ministry explained.

The plan was announced during a meeting of economy-related ministers on strengthening the industrial competitiveness of South Korea that came amid concerns that local petrochemical companies may not survive the ongoing crisis sparked by sluggish global demand and the oversupply of cheap Chinese products.

A recent report by Boston Consulting Group warned that if the current downturn persists, nearly half of South Korean petrochemical firms may not survive the next three years given their weak financial health.

Following the meeting, Industry Minister Kim Jung-kwan also met with officials from the petrochemical industry, where the two sides signed an agreement on government support for companies' voluntary restructuring efforts to boost the competitiveness of the sector.

For the goal, the petrochemical industry vowed to work toward reducing up to 3.7 million tons of naphtha cracking centre capacity and shifting to the production of high-value and eco-friendly products.

Under the agreement, petrochemical firms will draw up and submit a detailed business restructuring plan, including measures to bolster competitiveness and improve the financial structure, by the end of this year, according to the ministry.

The ministry said it will then review the plans to devise a support package covering financial aid, tax benefits, incentives for research and development (R&D) projects, and regulation reforms for the companies.

The government is also considering designating the central city of Seosan, which houses one of the country's three major petrochemical industrial complexes, as a special zone requiring a preemptive response to an industrial crisis, it added.

The government designated the southwestern city of Yeosu, which also hosts a petrochemical industrial complex, as such a zone in May.

—IANS

- IANS