South Korea Targets Urgent Overhaul in Troubled Petrochemical Sector
South Korea plans a major restructuring of its struggling petrochemical sector due to financial difficulties and industry-wide oversupply. Inspired by the shipbuilding sector's past reforms, the government aims for voluntary adjustments led by companies. The restructuring seeks improved efficiency amid weak global demand, potentially stabilizing conditions by 2027.
South Korea's government has announced impending plans to overhaul the country's ailing petrochemical sector, now deemed to be in a critical state. Industry Minister Kim Jung-kwan revealed the initiative on Thursday, drawing parallels to the country's shipbuilding industry's adjustments in the late 2010s during a similar financial crunch.
Yeochun NCC Co (YNCC), a petrochemical company based in Yeosu, has recently been under scrutiny due to looming debt obligations totaling 180 billion won ($130 million) due in August, amidst shrinking global petrochemical margins traced to over-expansion and weak demand over the past few years. This has put pressure on the sector's financial health both domestically and globally.
Analysts, including Hwang Kyu-won from Yuanta Securities Korea, emphasize the need for restructuring as the industry currently operates at only 80% capacity. President Lee Jae Myung supports this move with promises of tax legislation and regulatory leniency to facilitate mergers, acquisitions, and production coordination. This strategy echoes the last major restructuring during the 1999 Asian Financial Crisis.
(With inputs from agencies.)
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