South Korea's largest naphtha cracking center (NCC) operator Yeochun NCC and petrochemical companies based in the Yeosu industrial complex in South Jeolla Province have submitted their final restructuring plan for the "Yeosu No. 1" project. The restructuring will reduce NCC facility capacity by approximately 1.4 million tons.
The Ministry of Trade, Industry and Energy announced on the 20th that four companies—Yeochun NCC, Lotte Chemical, Hanwha Solutions, and DL Chemical—submitted the final version of their Yeosu industrial complex restructuring plan. Under the plan, Yeochun NCC will close its No. 2 and No. 3 plants while merging its remaining No. 1 plant with Lotte Chemical's Yeosu facility to create a new integrated entity. Once the merger is complete, Hanwha Solutions and DL Chemical, which hold stakes in Yeochun NCC, along with Lotte Chemical, are expected to each own one-third of the new entity.
Downstream operations will be reorganized around high-value-added products. Competitive production facilities—including Lotte Chemical's basic materials business in Yeosu and Hanwha Solutions and DL Chemical's polyethylene (PE) operations in Yeosu—will be carved out and merged into the new integrated entity. Through this consolidation, the merged company will shift its business structure toward high-value-added products such as medical-grade LDPE (low-density polyethylene) and functional POE (polyolefin elastomer) for automotive and cable applications.
With the Yeosu complex companies submitting their restructuring plan, the government has begun formal review and support procedures. The Fair Trade Commission received and began reviewing the preliminary merger application from Lotte Chemical and Yeochun NCC on the same day. The preliminary review is a system where companies pursuing a merger request the FTC to determine whether the combination would substantially restrict competition, prior to the statutory filing deadline.
The Ministry of Trade, Industry and Energy will convene a restructuring plan deliberation committee under the Special Act for Corporate Vitalization. The committee will thoroughly examine whether the plan meets restructuring requirements such as structural changes and business innovation, and whether goals including productivity improvements and financial soundness can be achieved. If the restructuring plan receives final approval, the government plans to deploy an extensive customized support package including large-scale financial assistance and research and development (R&D) support.
Industry observers estimate the restructuring will reduce NCC facility capacity by approximately 1.4 million tons, as Yeochun NCC's No. 2 and No. 3 plants have capacities of 915,000 tons and 470,000 tons, respectively. Combined with the previously announced Daesan No. 1 project involving HD Hyundai Chemical and Lotte Chemical's Daesan plant, which will cut 1.1 million tons of NCC capacity, the two restructuring projects alone will reduce NCC facility capacity by 2.5 million tons. This represents 68% of the government's reduction target of 3.7 million tons announced last year.
The government has indicated it will not be bound by the 3.7 million ton figure and will encourage maximum facility reductions to maximize industrial competitiveness. With both the Daesan and Yeosu complexes having submitted restructuring plans, the Ulsan industrial complex restructuring is also expected to accelerate.