Seoul: The government will assist the struggling petrochemical sector's "voluntary" restructuring efforts to address the industry-wide crisis caused by a global oversupply, the industry ministry announced Wednesday. The roadmap aims to reduce oversupply, transition to high-value specialty products, improve the fiscal health of companies, and minimize the restructuring's impact on regional economies, according to the Ministry of Trade, Industry and Energy.
According to Yonhap News Agency, the restructuring plan will follow three principles: simultaneous restructuring of three petrochemical complexes, sufficient self-rescue efforts and feasible business restructuring plans by companies, and a comprehensive government support package. The plan was revealed during a meeting of economy-related ministers focused on enhancing South Korea's industrial competitiveness amid concerns about the survival of local petrochemical companies due to sluggish global demand and cheap Chinese products.
A recent report by Boston Consulting Group highlighted that if the downturn continues, nearly half of South Korean petrochemical firms may not survive the next three years, given their weak financial health. Following the meeting, Industry Minister Kim Jung-kwan met with industry officials to sign an agreement on government support for voluntary restructuring efforts to bolster the sector's competitiveness.
The petrochemical industry committed to reducing up to 3.7 million tons of naphtha cracking center capacity and shifting to high-value and eco-friendly products. Under the agreement, firms will submit detailed business restructuring plans, including measures to improve competitiveness and financial structure, by the end of the year, according to the ministry.
The ministry will review these plans to create a support package, covering financial aid, tax benefits, incentives for research and development projects, and regulation reforms. The government is considering designating the central city of Seosan, home to one of the country's major petrochemical complexes, as a special zone requiring a preemptive response to an industrial crisis.
The government had already designated the southwestern city of Yeosu, which also hosts a petrochemical complex, as such a zone in May. "For the petrochemical industry to survive, bold restructuring is the only path forward," Kim stated, emphasizing that companies attempting to take advantage of government support without self-rescue efforts will not receive assistance.