Major South Korean petrochemical companies are dismantling their factories one after another due to oversupply from China and a global economic downturn.

Concerns are mounting that the industry is missing the “golden time” for recovery, with calls growing for decisive, government-led action to restructure the sector.

According to sources from the petrochemical industry on Tuesday, dismantlement is underway at several major production facilities owned by LG Chem Ltd., Lotte Chemical Corp., and Yeochun NCC Co.

LG Chem, which halted operations at its styrene monomer (SM) plant in Yeosu in March 2024, recently decided to scrap parts of its Gimcheon and Naju plants due to worsening profitability.

Scrapping involves shutting off feedstock supply to existing plants and completely emptying pipes and equipment - a de facto first step toward plant withdrawal.

Both factories were targeted for production efficiency measures due to declining profitability, although smaller in scale than facilities located in major industrial complexes.

At the Gimcheon plant, LG Chem will dismantle its superabsorbent polymer (SAP) production facilities, which have an annual capacity of 90,000 tons.

At the Naju plant, it will shut down styrene acrylate latex (SAL) facilities with an annual capacity of 20,000 tons.

Although these facilities had long operated stably, they are now being phased out due to aging equipment and intensifying competition from China.

“The move is part of an effort to improve efficiency in the petrochemical business,” said an official from LG Chem. “It does not mean a full business withdrawal, and we will continue operations through workforce redeployment and improved production efficiency.”

Yeochun NCC, which recently faced the brink of bankruptcy, suspended operations at its Yeosu Plant No. 3 on Friday.

Without immediate capital injection, the company is feared to face a liquidity crisis.

Lotte Chemical also halted operations on three out of five lines at its Yeosu Plant No. 2 in December 2024.

While temporary stoppages are common in the cyclical petrochemical sector, concerns are growing that these could lead to scrapping decisions, drawing close attention from local communities.

The company’s Daesan ethylene glycol (EG) Plant No. 2 has also been idle for more than a year.

Petrochemical companies are also rushing to secure cash by selling off non-core businesses and assets.

Lotte Chemical, which is pursuing an “asset-light” strategy, may have no choice but to dismantle more plants if the downturn persists.

Lotte Group earlier pledged its iconic Lotte World Tower as collateral to financial institutions to ease Lotte Chemical’s liquidity crisis.

LG Chem, in the meantime, recently secured nearly 2 trillion won ($1.44 billion) by selling its water treatment filter business and aesthetics division.

Industry insiders see the latest development from halting operations and selling non-core assets to dismantling facilities as a signal that conditions in the industry have deteriorated beyond endurance.

Workforce restructuring is also becoming inevitable.

Calls are growing for swift restructuring in the petrochemical sector, but discussions at the individual company level remain sluggish.

Lotte Chemical and HD Hyundai Oilbank Co. have discussed restructuring their joint venture, HD Hyundai Chemical Co., but have yet to reach a concrete conclusion.

[ⓒ 매일경제 & mk.co.kr, 무단 전재, 재배포 및 AI학습 이용 금지]