DL Chemical Proposes Shutting Larger 900,000-Ton Cracker at Yeochun NCC

DL Chemical has proposed that Yeochun NCC consider shutting down one of its larger 900,000-ton crackers—either Plant 1 or Plant 2—rather than the smaller Plant 3, as part of its restructuring efforts. The company also called for an expanded cost compensation ratio for Yeochun NCC, citing declining petrochemical product prices that are squeezing profits.

DL Chemical said it would not shy away from providing additional financial support as a shareholder if liquidity issues arise due to market deterioration, even after restructuring and business reorganization are completed.

The company released these views Wednesday alongside its position on the raw material supply contract with Yeochun NCC, cracker reduction plans tied to the government's petrochemical industry restructuring initiative, and the direction of Yeochun NCC's structural innovation.

DL Chemical emphasized that capacity cuts at Yeochun NCC should not be simple reductions but rather strategically designed to restore profitability while ensuring sustainability. The company concluded that shutting down one of the 900,000-ton Plants 1 or 2 would be more effective for improving profitability than closing the 500,000-ton Plant 3.

"From a fixed-cost perspective, shutting down a larger cracker is far more advantageous," a DL Chemical official said.

Regarding recent external consulting results on raw material pricing, DL Chemical described them as "a starting point that squarely faces reality" but added that "stronger safeguards and a shared responsibility structure that meet the expectations of creditors and the government are needed." While the establishment of agreed-upon standards is meaningful, more robust supplementary measures are required given current market conditions and risks, the company explained.

Accordingly, DL Chemical proposed that Yeochun NCC's structural innovation plan should include an expanded NCC cost compensation ratio, reflecting its position as both a shareholder and raw material purchaser.

Behind this assessment lies Yeochun NCC's deteriorating performance and structural risks. According to DL Chemical, Yeochun NCC's 2025 results are projected to be more than 300 billion won worse than the original management plan, which had targeted operating profit at break-even level. Concerns over supply gluts from additional capacity expansions in China and falling ethylene and propylene prices make it difficult to expect improvement in market conditions in the short to medium term.

DL Chemical said it plans to pursue comprehensive reorganization of its downstream business alongside capacity reductions. Product lines with low profitability and structural competitiveness issues will be phased out, with some facilities scrapped or redeployed for high-value product manufacturing. The company will also concentrate R&D on high-value-added products to overcome cost burdens under reduced production capacity.

DL Chemical made clear it would not evade responsibility as a shareholder for financial instability and employment issues that may arise during the restructuring process. The company said it would actively participate in funding needs during cracker reductions and business reorganization, and would consider additional financial support if liquidity issues emerge at Yeochun NCC due to worse-than-expected market conditions after all self-rescue efforts have been exhausted.

"We will not shift responsibility to others under the name of restructuring," DL Chemical Vice Chairman Kim Jong-hyun said. "We will be a partner that takes shared responsibility as a shareholder for cost compensation, business reorganization, and employment and financial stability."