1.4 Million Tons/Year! Two Ethylene Plants Permanently Shut Down

Affected by multiple factors including global petrochemical overcapacity, intensified competition, and recent feedstock supply crises, the restructuring process of South Korea's petrochemical industry is advancing at an unprecedented pace. According to the Korea Economic Daily, South Korean ethylene producer Yeochun NCC (YNCC) has decided to permanently shut down its No. 2 and No. 3 naphtha crackers in Yeosu, South Korea, which will reduce the company's ethylene production by 60%.

YNCC submitted a restructuring plan to the South Korean government on March 6, closing two units at its Yeosu plant with annual capacities of 900,000 tons and 500,000 tons respectively. YNCC's ethylene capacity will drop from 2.3 million tons to approximately 900,000 tons.

Notably, YNCC's difficulties have been evident for some time. As a bellwether company in South Korea's petrochemical industry, YNCC was once hailed as the "Samsung Electronics of the petrochemical sector," but it has since been mired in debt crisis amid drastic changes in global supply and demand patterns. As early as August 2025, YNCC narrowly avoided default due to financial difficulties and had to urgently borrow from its two major shareholders to stay afloat. In December 2025, DL Chemical suggested prioritizing the shutdown of the No. 1 cracker, noting that the company's 2025 performance had shrunk by more than 300 billion won compared to initial plans, with operating profit already falling to the breakeven point.

Industry Crisis: Severe Oversupply! Product Competitiveness Declines Sharply!

YNCC's drastic restructuring is not an isolated case but rather a reflection of the collective ups and downs of South Korea's petrochemical industry. In recent years, with the continuous commissioning of large-scale production capacity in China and the Middle East, the global petrochemical market has experienced severe oversupply. South Korea's general product structure centered on naphtha cracking has seen its competitiveness decline sharply under high-cost pressure. According to Xinhua News, China's ethylene production in 2023 was approximately four times South Korea's capacity, while the price of Middle Eastern products was only about 30% of South Korea's.

Faced with this existential crisis, the South Korean government intervened in August 2025. Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol chaired a meeting calling for proactive restructuring in the petrochemical industry. At that time, South Korea's top ten petrochemical companies signed a self-rescue agreement, planning to voluntarily reduce naphtha cracker capacity by up to 25%, equivalent to 2.7 to 3.7 million tons per year.

Entering 2026, this plan has entered a substantial "implementation" phase. On February 25, the South Korean government formally approved the first restructuring project—the integration of Lotte Chemical and HD Hyundai Chemical's Daesan complex. The core of the plan is to shut down a 1.1 million-ton naphtha cracker owned by Lotte Chemical in Daesan and merge related assets to establish a new entity. To facilitate this process, the government provided a comprehensive financial and tax support package exceeding 2.1 trillion won (approximately 10 billion RMB), including 2 trillion won in financial support, new loans from financial institutions, and the conversion of existing loans into perpetual bonds.

Geopolitical Factors Intensify Feedstock Crisis

While internal structural adjustments are underway, external geopolitical risks have delivered a heavy short-term blow to South Korea's petrochemical industry. The recent tensions in the Strait of Hormuz have led to a sharp tightening of Middle Eastern naphtha supply, adding insult to injury for South Korean companies that rely heavily on imports from the region.

South Korea is the world's largest naphtha importer, with about 60% of its imports dependent on the Gulf region. As feedstock supply disruption risks intensify, YNCC was forced to declare force majeure in mid-March, operating only at minimum capacity. Major players such as LG Chem have also been forced to reduce cracker operating rates to 60% and have warned of potential plant shutdowns. Some agencies have warned that if market conditions do not improve by mid-April, multiple ethylene plants in South Korea could face large-scale production halts.