Korea to cut naphtha cracking capacity under restructuring plan

Seoul – South Korea will cut between 2.7 and 3.7 million tonnes of naphtha cracking capacity as part of a voluntary restructuring agreement signed with 10 petrochemical producers on 20 Aug.

The Ministry of Trade, Industry and Energy (MOTIE) said the initiative is aimed at overcoming structural downturn in the sector and securing future competitiveness.

The ministry described the agreement as the start of “full-fledged restructuring,” moving away from the industry’s past “endurance strategy.”

The move will see companies reduce naphtha cracking capacity, shift into “high-value and eco-friendly products” and minimise the impact on regional and national economies.

As part of the deal, petrochemical firms will prepare detailed restructuring plans by the yearend, covering facility reductions, product conversion, competitiveness measures and improvements to financial structures.

In return, the state will provide support involving “simultaneous restructuring” across three main petrochemical complexes which were not named.

The government will also submit feasible restructuring plans and prepare "comprehensive support packages" spanning finance, taxation, R&D and deregulation.

The ministry is also moving to designate Seosan City as “an industrial crisis pre-emptive response zone”, after Yeosu was granted the same status in May.

Under the new system, the city will now have access to employment retention subsidies and living stability loans.

“Bold and swift restructuring is the only breakthrough for our petrochemical industry to secure future competitiveness,” said Industry minister Kim Jeong-Kwan.

He urged companies to “actively engage in restructuring with a desperate sense that it must be done now.”