SK Geo Centric, the petrochemical subsidiary of SK Group, has suspended negotiations with Korea Petrochemical Ind. Co. (KPIC) regarding the sale of its naphtha cracking center (NCC) at Ulsan, South Korea, as per Chemweek.
The discussions, which began last year, have made little progress and have now reportedly come to a halt.The report said an official from SK Geo Centric indicated that while negotiations have not completely broken down, both companies are in the process of readjusting their internal positions. Initially, SK Geo Centric purportedly aimed to sell its NCC facilities to KPIC; however, the option of operating the facilities as a joint venture was also strongly considered during discussions. This would involve establishing a corporation based on the Ulsan NCC, allowing both companies to share ownership while KPIC would manage integrated operations, it added.The sluggish pace of negotiations can be supposedly attributed to significantly differing interests between the two companies. SK Geo Centric, currently in a relatively strong financial position, faces less urgency for restructuring as the petrochemical industry shows signs of gradual recovery, it said.Conversely, KPIC has expressed hesitance to invest substantial funds into facilities that may not be immediately utilized, even in a JV format. KPIC reported a loss of 14.4 billion South Korean won ($10.3 million) in the first half of the year, with cash reserves around 93 billion won, indicating financial constraints.According to the press report, the prolonged negotiations are compounded by the need to include S-OIL in discussions regarding facility adjustments. S-OIL is set to operate its crude oil-to-chemicals facility by the end of next year, which adds another layer to the restructuring plans at Ulsan.An industry insider to Business Korea highlighted the importance of S-OIL’s involvement, noting, “Ulsan’s restructuring involves not just these two companies but also S-OIL, which will produce 1.8 million metric tons (MMt) of ethylene next year.”While negotiations at Ulsan are stalled, discussions at Yeosu and Daesan are progressing. In Yeosu, LG Chem is in talks with GS Caltex to consolidate their steam crackers, according to a report of Sept. 3 in South Korea’s JoongAng Ilbo daily newspaper. The move forms part of a broader petchem industry restructuring that was agreed on recently by the South Korean government and leading petchem producers. There are indications that both companies have shared their integration plans with the government.At the Daesan petchem complex, Lotte Chemical and HD Hyundai Chemical are discussing the integration of operations under Hyundai Chemical, with Lotte operating an NCC with a capacity of 1.1 MMt and HD Hyundai Chemical with 850,000 metric tons per year. Speculation surrounds the potential involvement of LG Chem in these negotiations as well, said the report.
mrchub.com