Seoul, Aug 17 The South Korean government is set to announce policy measures to restructure the struggling petrochemical industry, which has been hit hard by a global oversupply, officials said Sunday.
The Ministry of Trade, Industry and Energy is preparing inter-ministry measures to encourage companies to adjust their business portfolios while offering financial and tax support to help them carry out restructuring in a timely manner, Yonhap News Agency reported, citing officials.
The local petrochemical industry has been in a prolonged slump in recent years amid sluggish demand and an oversupply caused by massive facility expansions in China and Middle Eastern countries.
Recently, Yeochun NCC Co., a joint venture between Hanwha Group and DL Group, faced a liquidity crisis that forced its shareholders to provide emergency loans.
A recent report by Boston Consulting Group warned that if the current downturn persists, nearly half of South Korean petrochemical firms may not survive the next three years, given their weak financial health.
The government's upcoming measures will include legal, administrative and financial incentives to support companies pursuing restructuring.
If companies decide to readjust their business portfolios or pursue mergers and acquisitions (M&As), the government plans to provide full administrative and financial assistance.
In recent weeks, the government has held consultations with leaders of major petrochemical companies to collect their restructuring plans.
Earlier, the industry ministry suggested various options, such as facility shutdowns, asset sales, joint ventures and M&As, as possible restructuring strategies.
LG Chem recently suspended operations at its styrene monomer facilities in Yeosu, some 320 km south of Seoul, and Daesan, 85 km southwest of the capital, and decided to halt alcohol production at its plant in the southwestern city of Naju.
Lotte Chemical Corp. and HD Hyundai Oilbank Co. are also reportedly in talks to merge their respective naphtha cracking centre (NCC) assets in Daesan.
"We are keenly aware of the challenges facing the petrochemical industry," Industry Minister Kim Jung-kwan said during a recent field visit. "The industry must work together to pursue voluntary restructuring efforts, such as facility adjustments."
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