Will Korea postpone restructuring of petrochemical industry?

Lotte Chemical's factory in Yeosu, South Jeolla Province / Courtesy of Lotte Chemical By Park Jae-hyuk Concerns are growing over the possibility that the leadership vacuum created following President Yoon Suk Yeol’s short-lived martial law attempt last week could lead the government to postpone its planned announcement this week regarding measures to enhance the competitiveness of the struggling Korean petrochemical industry. According to the office of Rep. Kim Jung-ho of the main opposition Democratic Party of Korea, the Ministry of Trade, Industry and Energy has remained uncertain about when to announce those measures, which were supposed to be disclosed by the end of this year.

The government is said to be facing difficulties determining who should make the final decision. Although the prime minister’s office was initially expected to oversee the industrial restructuring policy that needed pan-governmental cooperation, ministers offered to resign after martial law was revoked. Some of them are under investigation over their attendance at the Cabinet meeting for the martial law declaration.



Before the recent political turmoil, petrochemical firms anticipated that the government would announce its restructuring plans by mid-December. Throughout this year, they have desperately called for the measures, as the oversupply of Chinese products and the global economic recession have deteriorated their profitability. They have particularly sought relaxed antitrust regulations to facilitate mergers of unprofitable factories within each company, helping to mitigate intense competition.

Samil PwC also advised the operators of naphtha cracking centers in Ulsan, Yeosu and Daesan industrial complexes to establish an integrated company to shut down or sell inefficient facilities. “For the restructuring to gain momentum, the government should legislate a special law and provide unprecedented financial support,” the accounting firm said in a report earlier this month. Amid the lingering uncertainty, some companies are even reconsidering their business strategies.

“We are keeping a close watch on this issue,” a petrochemical industry official said. Read More Petrochemical firms tighten belts to improve profits LG, Lotte, Kumho move to sell petrochemical plants amid China-driven glut In an apparent attempt to reassure them, Deputy Prime Minister and Finance Minister Choi Sang-mok on Wednesday mentioned the petrochemical industry as one of the sectors to receive government support, along with the semiconductor, battery and steelmaking industries. “With the Special Act on the Corporate Revitalization, the government will induce preemptive restructuring of the petrochemical industry and other struggling sectors,” he said during a meeting with economic ministers.

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