Korean Petrochemical Giants Navigate Industry Downturn, Eyeing Strategic Shifts Amidst Chinese Oversupply

Seoul (South Korea): Amidst a challenging landscape shaped by a surplus of Chinese products, South Korean petrochemical giants are strategizing to weather the storm. Industry sources reveal a wave of halting investments and contemplation of divesting unprofitable assets, signalling a pivot towards resilience in an increasingly competitive market.

LG Chem, one of Korea's leading chemical entities, is reportedly in talks with Kuwait Petroleum Corp. to divest a portion of its stake in its Yeosu-based naphtha cracking centre. This move follows unsuccessful attempts to find a suitable buyer last year, highlighting the company's determination to enhance its competitiveness amidst market volatility.

Kumho petrochemical has been seeking divestment of several projects including Naphtha, the however the company declined to comment on similar divestment in key product chains like EPDM Rubber as Kumho is among the largest producer of EPDM Rubber in the international market.

LG Chem has been in talks with few contenders and has been actively pursuing to sell its 2nd NCC Facility in Yeosu, South Korea. The facility produces 800 KTPA of Ethylene and 480 KTPA of Propylene.

Similarly, Lotte Chemical is exploring options to sell its Malaysian manufacturing plant, Lotte Chemical Titan, amidst a challenging economic backdrop. While potential buyers loom, past setbacks in divesting subsidiaries underscore the uncertainties ahead for the conglomerate.

Hyosung TNC, a global spandex powerhouse, has shelved plans for butanediol production, citing a surge in Chinese supply—a testament to the industry's shifting dynamics. Meanwhile, Kumho Petrochemical is set to unload its stake in Chinese joint ventures, attributing the decision to environmental regulations, amidst rumors of further divestment.

The resurgence of Chinese production capacity, coupled with a global economic slowdown, has posed formidable challenges to Korean petrochemical firms. The pre-pandemic anticipation of a rebound post-reopening has given way to a sober reality, with analysts expressing scepticism about near-term recovery prospects.

As Korean petrochemical giants navigate this turbulent terrain, strategic shifts and diversification efforts emerge as imperative strategies for long-term sustainability in a fiercely competitive global market.