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South Korea petrochemical overhaul likely to shut small, stand-alone naphtha crackers
South Korea petrochemical overhaul likely to shut small, stand-alone naphtha crackers
About this update from S-oil Corporation
By Heejin Kim and Trixie Yap Small and stand-alone naphtha crackers are likely to shut while some plants could merge as part of an overhaul of South Korea's oversupplied petrochemical sector, analysts said, which will cut naphtha demand at the world's largest importer of the fuel.Ten South Korean petrochemical companies agreed to reduce their naphtha-cracking capacity by between 2.7 million and 3.7 million metric tons per year, government officials said last week, to cull surplus supply and improve profit margins. The cuts would be equivalent to about 25% of the country's overall capacity, including the Shaheen project due to start up next year.The companies need to submit an outline by the end of the year on steps they plan to take, South Korea's industry ministry said.An SK Innovation spokesperson said the company is considering various options including the possible closure of a cracker. Its subsidiary SK Geo Centric operates a 660,000-tons per year cracker at Ulsan.Analysts say Yeochun NCC Co (YNCC), a joint venture between DL Chemical and Hanwha Solutions KRX:009830 and the country's third-largest ethylene producer, may have to shut one or two of its three crackers."We see YNCC as the least competitive due to weak financials and (a lack of) integration," Citi analysts led by Oscar Yee said in a note.YNCC's debt-to-equity ratio hit 249% by the end of the first half of 2025, while it is a major net ethylene seller, they added.Plants that may be permanently closed include YNCC's No. 3 cracker which was shut in August and possibly a second YNCC unit, they said.YNCC did not respond to phone calls from Reuters. A DL Chemical spokesperson said nothing has been decided on restructuring including how to handle YNCC."The industry should participate in (the) restructuring, making sure there's no free rider," he said.A Hanwha spokesperson said the company is considering various options and plans to submit their plan to the government as soon as possible.HD Hyundai KRX:267250 is looking to acquire Lotte Chemical’s KRX:011170 naphtha cracker, or the companies may merge their cracker operations, trade sources have said. Lotte, South Korea's second-largest ethylene producer, declined to comment, while HD Hyundai said nothing has been decided yet.Some companies may choose to mothball smaller, inefficient units that are due for maintenance, instead of investing furthe...