SK Group exits Sinopec-SK Petrochemical, selling 35% stake amid oversupply, losses, and strategic shift to AI, batteries, and chips.
South Korea’s SK Group has decided to divest its entire 35% stake in Sinopec-SK Petrochemical, its joint venture with Chinese energy powerhouse Sinopec, marking a significant retreat from the commodity chemicals market. This move, reported by KED Global, reflects the conglomerate’s strategic pivot away from sectors plagued by oversupply and dwindling margins.
The sale is being managed by SK Geo Centric Co., a subsidiary of SK Innovation Co., which has opened discussions with China Petroleum & Chemical Corp. (Sinopec), the majority 65% stakeholder in the venture, as well as with other potential Chinese buyers. The expected transaction value is estimated at roughly 819.3 billion won ($594 million), close to its book value.
Sinopec-SK Petrochemical was launched in 2013 through a joint investment of 3.3 trillion won. The Wuhan-based facility once stood as a hallmark of SK’s “China Insider” strategy, boasting a production capacity of 3.2 million tons of general-purpose chemicals annually, including 1.1 million tons of ethylene. At its peak, the venture generated annual sales approaching 10 trillion won, positioning itself as a standout success for nearly a decade.
In its first eight years of operation, the plant accumulated nearly 2 trillion won in operating profit, largely supported by global ethylene shortages, which bolstered prices and profitability. However, since 2021, fortunes have sharply reversed. The joint venture has posted losses exceeding 1 trillion won, hit hard by China’s rapid ethylene production expansion and sluggish domestic demand. Ethylene output in China nearly doubled from 2020 to 2023, reaching 60 million tons, eroding margins across the industry.
The decision highlights SK Group’s broader strategic shift toward its “ABC” model—artificial intelligence, batteries, and chips—signaling its intention to focus resources on higher-growth sectors. In line with this, SK has been scaling back or divesting several commodity chemical operations both domestically and abroad. This includes shutting down one of its two naphtha cracking units in Ulsan and looking for buyers for the remaining facility.
KED Global has also reported that SK Geo Centric is seeking to offload overseas assets it previously acquired from Dow Chemical and France’s Arkema in a combined sale, as part of the group’s wider restructuring to secure fresh capital. The restructuring effort coincides with a broader shake-up in Korea’s petrochemical sector, which has been heavily strained by Beijing’s aggressive capacity build-out.
As one of the world’s largest naphtha importers, Korea is particularly exposed to volatility in the petrochemical industry. With Chinese producers churning out generic products at far lower costs, Korean companies have been among the hardest hit, intensifying the financial pressure on firms like SK Group. The sale of Sinopec-SK Petrochemical thus represents not only the end of an ambitious chapter in SK’s China strategy but also a telling sign of shifting priorities within the global chemicals landscape.
