According to industry sources on Sunday, the country's third-largest ethylene producer is likely to go bust if it fails to secure 310 billion won (about $223 million) in operating funds by Aug. 21. The company has suffered prolonged losses due to an oversupply of ethylene feedstock from China.
The joint venture was established in 1999 by Hanwha Group (Hanwha Solutions) and DL Group (DL Chemical), which hold a 50 percent stake each. Talks between the two shareholders to provide a lifeline to YNCC have begun, but they remain deadlocked over their differences.
Hanwha's board of directors decided late last month to inject an additional 150 billion won (about $108 million) into YNCC as part of rescue efforts that also includes operational restructuring through production cuts.
It believes that if it can secure a combined 300 billion won (about $216 million) along with DL Group, YNCC could avoid default and obtain sufficient funds to operate through the end of this year, when Korea Development Bank's foreign currency guarantees and asset-backed loans will be renewed.
DL Group, however, reportedly insists that significant restructuring must come first before any loan can be considered. Since both shareholders already injected 100 billion won (about $72 million) each earlier this year, DL remains reluctant to provide further support.
To save YNCC, both sides must reach a deal by this week. But prospects remain uncertain due to huge differences over ethylene supply prices and related cash flow concerns.
YNCC has been cash-strapped since 2022, with net losses of 347.7 billion won (about $250 million) in 2022, 240.2 billion won (about $173 million) in 2023, and 236 billion won (about $170 million) in 2024, largely due to a prolonged glut caused by oversupply from China.
The country's top two players in the petrochemical market, LG Chem and Lotte Chemical, are also struggling, having sold or liquidated assets to weather the downturn.
LG Chem posted an operating loss of 90.4 billion won (about $65 million) in the second quarter of this year, while Lotte Chemical recorded an operating loss of 244.9 billion won (about $176 million), marking its seventh consecutive quarterly loss.
"Major petrochemical companies' financial health is rapidly deteriorating due to mounting losses. If the government-led massive restructuring plan is not ready, measures such as electricity rate reductions for petrochemical industrial complexes in Yeosu and Ulsan may need to be implemented as soon as possible," said an industry watcher.
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