South Korea Petrochemical Powerhouses and Production Boom

South Korea Sets Stage to Revitalize Petrochemical Industry

Industry Minister Kim Jung-kwan announced Thursday that the Korean government will unveil a comprehensive plan this month aimed at reshaping the sector’s struggling petrochemical businesses.

Key Players in the Nation’s Petrochemical Landscape

• Hyundai Hanwha Solutions Corp – Specialist in advanced refining solutions.
• Hyundai Co Ltd – One of the largest integrated chemical producers.
• LG Chem Ltd – Global leader in polymer and chemical manufacturing.

Additional companies are listed below based on rankings from the Korea Chemical Industry Association (KCIA). Sign up here to explore the full roster.

OVERVIEW

Korean Petrochemicals Shocked by Market Glut

Surplus Seismic Impact

South Korean producers have endured significant setbacks stemming from an oversupply, especially within China—the leading petrochemical hub—and a dampened demand trajectory.

Production Capacity Overview

South Korea’s annual output figures sit at approximately 13 million metric tons of ethylene and 11 million metric tons of propylene, positioning the nation as the world’s fourth-largest petrochemical producer, according to the Korean Chamber of International Affairs (KCIA).

Import Profile

The country also took its place as the largest importer of petrochemical feedstock naphtha in 2024, bringing in 652,000 barrels per day, based on data extracted from analytics firm Kpler.

Key Challenges

• Excess supply causing price drops
• China’s demand slowdown amplifying pressure
• Strategic balance needed to stabilize market flows

Strategic Outlook

South Korean producers must now recalibrate supply strategies, explore diversification avenues, and forge stronger market alliances to mitigate the risks induced by oversupply and sluggish demand.

MAJOR PRODUCERS AND PRODUCTION

LG Chem Aims to Become the World’s Biggest Producer of Ethylene and Propylene

LG Chem (051910.KS) has announced that it will open new plants that are designed to produce the two most critical plastic feedstocks used worldwide: ethylene and propylene. Those new facilities will have a combined planned output of 3.380 million tpy for ethylene and 1.980 million tpy for propylene, making LG Chem the highest‑capacity producer in the world.

Why Ethylene and Propylene Matter

Ethylene and propylene are the raw materials for a huge range of products, from automobile parts to construction‑sector components. Companies around the globe rely on those feedstocks to manufacture the plastics that power modern industries.

Second‑Quarter Performance

• LG Chem’s petrochemicals division recorded an operating loss of 90.4 billion won (about $65.3 million) in the second quarter.
• Despite the loss, the company remains focused on building capacity for the next generation of plastics.

Future Outlook

LG Chem’s new plants will position the company to become the unrivaled leader in ethylene and propylene production. The expansion plans demonstrate a long‑term commitment to meeting global demand for the plastics that power everyday life.

LOTTE CHEM

Lotte Chemical Sells Stake to Sharpen Balance Sheet

Key Moves and Financial Snapshot

• Ethylene Capacity: 2.330 million tpy
• Propylene Capacity: 1.191 million tpy
• International Footprint: Subsidiaries in Malaysia and a major project in Indonesia

Stake Sale in Indonesia

Lotte Chemical sold a 25% slice of its Indonesian subsidiary, PT Lotte Chemical Indonesia (LCI). The ownership fell from 49% to 24%, a move aimed at reducing debt and strengthening liquidity.

Sold Unit in Pakistan

The company also divested Lotte Chemical Pakistan (LOTT.PSX) earlier this year, a step that helped improve its financial position and cut outstanding debt.

Second‑Quarter Operating Loss

Despite these sell‑offs, Lotte Chemical reported an operating loss of 224.90 billion won in the second quarter.

Strategic Takeaway

The stakeholder sales signal Lotte Chemical’s intent to streamline assets, lower debt and position itself for long‑term sustainability while maintaining a robust production capacity.

YNCC

Yeochun NCC secures loan to stabilize debts

Yeochun NCC, the joint venture of DL Chemical and Hanwha Solutions, ranks third among global producers.

• Ethylene capacity: 2.285 million tpy
• Propylene capacity: 1.289 million tpy

DL Chemical will provide a loan of 150 billion won to YNCC, aiding in the settlement of debts due in August.

YNCC’s 2024 operating loss narrowed to 150 billion won, a marked improvement from the 239 billion won loss recorded a year earlier.

HANWHA TOTALENERGIES

Hanwha & TotalEnergies JV Overview

Hanwha has entered a strategic partnership with TotalEnergies (TTEF.PA), establishing a joint venture that has launched a new production facility known as Hanwha TotalEnergies.

Production Capacity

• Ethylene: 1.525 million tpy
• Propylene: 1.064 million tpy

Financial Performance

In the first quarter, the venture experienced an operating loss of 118 billion won, contrasting sharply with a profit of 51 billion won recorded during the equivalent period of the previous year.

HD HYUNDAI CHEMICAL

HD Hyundai Chemical Eyes Expanding Daesan Cracker Operations

New Capacity Milestone

• Target of 850,000 tpy for ethylene production
• Planned output of 451,000 tpy for propylene

Strategic Options Ahead

• Potential acquisition of Lotte Chemical’s cracker unit
• Alternative merger of cracker operations at the Daesan complex
• HD Hyundai confirms no decision has yet been finalized

Financial Performance Snapshot

• Second‑quarter operating loss of 170 billion won
• Contrast with profit of 560 million won a year earlier

Trade Sources Overview

• Reports suggest either corporate acquisition or joint operation merge
• No definitive commitment announced by HD Hyundai

KPIC

KPIC Faces Sharp Loss in Ulsan Facility

Financial Snapshot

• Annual loss: 4.5 billion won
• Previous profit: 53 million won

Production Capacity

• Ethylene output: 900,000 tpy
• Propylene output: 560,000 tpy

GS CALTEX

New financial challenge for GS Caltex’s Yeosu complex

Capacity highlights

• Ethylene production – 900,000 tonnes per year
• Propylene output – 970,000 tonnes per year

Operating loss status

GS Caltex’s petrochemical division swung to a loss of 53 billion won in the first quarter, a sharp expansion from the 1 billion won loss recorded during the same period of the prior year.

SK GEOCENTRIC

SK Geo Centric Expands Ethylene and Propylene Production

SK Geo Centric, a subsidiary of SK Innovation (096770.KS), has unveiled a new production tab owned by the country’s leading refiner, SK Energy. The new tab is capable of producing 660,000 tpy of ethylene and 380,000 tpy of propylene.

Impact on the Plastic Recycling Initiative

• SK Group has decided to suspend SK Geo Centric’s plan to build a plastic recycling complex in Ulsan.
• Local media reports indicate that the project was halted following a strategic review within the group.

Future Outlook

While the new production tab strengthens SK Geo Centric’s position in the chemical market, the suspension of the plastic recycling complex reflects the group’s shifting priorities towards more sustainable and profitable ventures.

S-OIL

South Korea’s Refining Powerhouse S‑Oil Expands Ethylene and Propylene Capacity

The country’s third‑largest refinery, S‑Oil (010950.KS), has laid a fresh “tab” that will churn 182,000 tonnes per year (tpy) of ethylene and 840,000 tpy of propylene in Ulsan.

Over‑Supply Alarm Intensifies

• South Korea’s petrochemical market is already facing a glut of ethylene.
• Adding to the oversupply concerns, S‑Oil is WIP on a 1.8‑million‑tpy ethylene facility.

Saudi Aramco Partners on the Shaheen Project

Aramco’s largest foreign investment, the Shaheen plant, is jointly owned by S‑Oil’s majority shareholder Saudi Aramco (2222.SE). The project is slated for a 2026 completion date, as announced in Aramco’s second‑quarter earnings.

Fourth‑Quarter Loss Trends Up

S‑Oil posted an operating loss of 344 billion won in the second quarter, versus a 161 billion won profit a year earlier. ($1 = 1,384.5 won)

Reporting
by Mohi Narayan in New Delhi and Heekyong Yang in Seoul
Editing by Florence Tan and Rachna Uppal

Insights from Mohi Narayan on Energy Trends

Asia’s Fuel Recovery Post‑COVID‑19

• Demand Surge: Asia’s fuel consumption rebounding at a 12% rate.
• Supply Chain Rebound: Refineries adjusting pipeline logistics to meet new demand levels.

Global Energy Transition and Refinery Expansion

• Expansion Plans: Refiners accelerating capital projects to modernize operations.
• Fuel Supply Impact: Transition influencing long‑term fuel availability and pricing.

Data‑Driven Analysis on Refinery Operations

• Operational Efficiency: Leveraging detailed metrics to enhance performance.
• Profitability Insights: Identifying key drivers and opportunities across the sector.

Evolving Oil Trade Flows

• Global Trade Patterns: Monitoring shifts in import and export dynamics.
• Storage Demand: Estimating storage requirements amid market volatility.

Electrification of the Auto Fleet

• Impact on Fuel Supply Chains: Transition reshaping distribution networks.
• Strategic Adjustments: Refiners realigning asset portfolios to reduce fuel sales dependence.

Build‑Out of Petrochemical Capacity

• Capacity Expansion: Refiners building petrochemical plants to diversify revenue streams.
• Dependence Reduction: Focus on reducing reliance on traditional fuel sales.

Connect with Mohi Narayan

Email: mohinara@tr.com
LinkedIn: mohinara-links