SEOUL, December 30 (AJP) -The government is intensifying pressure on South Korea's major petrochemical producers to further reduce naphtha cracking capacity during the prolonged industrial slump, demanding more aggressive streamlining from Hanwha, DL and Lotte tenants of Yeocheon complex, industry sources said.
According to the sources on Tuesday, Lee Bong-hee, executive vice president and head of corporate finance at the Korea Development Bank (KDB), visited Yeocheon NCC on Friday for an on-site inspection. He later held discussions with executives from Hanwha Solutions, DL Chemical and Lotte Chemical on voluntary reductions in naphtha cracking capacity.
During the meetings, Lee asked the three companies to submit a concrete plan to permanently shut Yeocheon NCC’s third plant, which has been idled and has an annual capacity of 470,000 tons, the sources said. He also conveyed that if additional cuts are made at Yeocheon NCC’s first plant (900,000 tons) and second plant (910,000 tons), as well as at Lotte Chemical’s Yeosu NCC facility (1.23 million tons), the government and creditor banks could offer support in return.
The state policy bank is the lead creditor bank for Hanwha Solutions, DL Chemical and Yeocheon NCC, and also serves as a creditor to Lotte Chemical. Lee oversees petrochemical restructuring and creditor-bank management at KDB. With the companies seeking bond maturity extensions and additional financing, his targeted visit to Yeocheon NCC was widely viewed as adding pressure on the firms to move faster on restructuring, the sources said.
KDB has also urged the companies to submit detailed capacity-reduction plans alongside additional self-help measures, including further capital injections by major shareholders. The policy lender has made clear that it will not provide additional financial support unless the three companies reach agreement on concrete restructuring steps, the sources added.
At the same time, Hanwha Solutions, DL Chemical and Lotte Chemical are accelerating preparations to establish a joint venture to consolidate their naphtha cracking operations. The companies aim to set up a jointly funded subsidiary by the first quarter of 2027 to jointly operate Yeocheon NCC’s first and second plants together with Lotte Chemical’s Yeosu NCC facility.
They are currently conducting due diligence with Samil PwC and other advisers to finalize the joint venture structure and additional capacity-reduction measures, which they plan to submit to the government in January, the sources said.
If the companies propose further cuts, total industry-wide reductions in naphtha cracking capacity could exceed the government’s initial target of 2.7 million to 3.7 million tons by roughly 1 million tons, according to industry estimates. Market participants are watching closely whether authorities and creditor banks will selectively accept voluntary restructuring plans. Companies fear that if their proposals fall short of official expectations, only the originally announced cuts may be recognized, limiting the scope of support.
Lee Deok-hwan, emeritus professor of chemistry at Sogang University, cautioned that direct engagement by government-side officials with individual firms before voluntary restructuring plans are finalized could undermine trust in the process.
“Companies may interpret such moves as groundwork for accepting only the measures favored by the authorities while rejecting others,” he said.
* This article, published by Aju Business Daily, was translated by AI and edited by AJP.Copyright ⓒ Aju Press All rights reserved.
