NewKerala.com

Key Points

South Korea is taking decisive action to rescue its struggling petrochemical sector from a severe global oversupply crisis. The government will introduce comprehensive measures to support companies through financial incentives, administrative assistance, and restructuring strategies. A recent Boston Consulting report highlighted the industry's critical condition, suggesting nearly half of the firms might not survive without intervention. Industry leaders like LG Chem and Lotte Chemical are already implementing significant operational changes to adapt to the challenging market environment.

Key Points: South Korea's Bold Petrochemical Industry Rescue Plan Unveiled

  • Seoul prepares inter-ministry measures to support petrochemical companies
  • Boston Consulting warns half of firms may not survive next three years
  • Government offers financial and administrative incentives for restructuring
  • LG Chem and other major firms already implementing facility adjustments
2 min read

South Korea to unveil measures to restructure petrochemical industry

Seoul launches comprehensive restructuring strategy to save petrochemical sector from global oversupply crisis and potential industry collapse

"The industry must work together to pursue voluntary restructuring efforts - Kim Jung-kwan, Industry Minister"

Seoul, Aug 17

The government is set to announce policy measures to restructure the struggling petrochemical industry, which has been hit hard by a global oversupply, officials said on Sunday.

The Ministry of Trade, Industry and Energy is preparing inter-ministry measures to encourage companies to adjust their business portfolios while offering financial and tax support to help them carry out restructuring in a timely manner, according to the officials, reports Yonhap news agency.

The local petrochemical industry has been in a prolonged slump in recent years amid sluggish demand and an oversupply caused by massive facility expansions in China and Middle Eastern countries.

Recently, Yeochun NCC Co., a joint venture between Hanwha Group and DL Group, faced a liquidity crisis that forced its shareholders to provide emergency loans.

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.

The government's upcoming measures will include legal, administrative and financial incentives to support companies pursuing restructuring.

If companies decide to readjust their business portfolios or pursue mergers and acquisitions (M&As), the government plans to provide full administrative and financial assistance.

In recent weeks, the government has held consultations with leaders of major petrochemical companies to collect their restructuring plans.

Earlier, the industry ministry suggested various options, such as facility shutdowns, asset sales, joint ventures and M&As, as possible restructuring strategies.

LG Chem recently suspended operations at its styrene monomer facilities in Yeosu, some 320 kilometers south of Seoul, and Daesan, 85 km southwest of the capital, and decided to halt alcohol production at its plant in the southwestern city of Naju.

Lotte Chemical Corp. and HD Hyundai Oilbank Co. are also reportedly in talks to merge their respective naphtha cracking center (NCC) assets in Daesan.

"We are keenly aware of the challenges facing the petrochemical industry," Industry Minister Kim Jung-kwan said during a recent field visit. "The industry must work together to pursue voluntary restructuring efforts, such as facility adjustments."

- IANS

Share this article:

Reader Comments

P
Priya S
Global oversupply is really hurting industries everywhere 😔 Hope they find a good solution. Maybe Indian companies can explore partnerships with Korean firms during this restructuring phase?
A
Aditya G
This shows why we need stronger domestic manufacturing policies. Relying too much on global markets makes industries vulnerable. Make in India initiative is more important than ever!
S
Sarah B
While government support is good, I hope they also focus on environmental impact during this restructuring. Petrochemical plants can be quite polluting - this could be an opportunity to go greener.
K
Karthik V
The BCG report warning is alarming! 50% companies might not survive? This shows how important it is to diversify business portfolios. Indian companies should learn from this and not put all eggs in one basket.
N
Nisha Z
Mergers and acquisitions seem to be the way forward. But I hope workers' jobs are protected during this restructuring. Many families depend on these industries for livelihood.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50