South Korea's top 3 petrochemical firms cut new hires by 20% in a year

LG Chem, Lotte Chemical, Hanwha Solutions

Analysis of sustainability reports

Oversupply drives continued losses

New hiring reduced to cut fixed costs

Investment in high-value materials continues despite headwinds

South Korea's major petrochemical companies have cut new hiring by more than 100 employees in a single year as they work to ease the financial strain from mounting losses. With headwinds such as Chinese oversupply showing no sign of abating, the industry is expected to remain cautious about expanding its workforce for now.

Sustainability reports released Wednesday by the three companies show that LG Chem, Lotte Chemical and Hanwha Solutions each reduced new hires last year compared with the year before. Lotte Chemical saw the steepest decline, bringing on just 107 new employees last year — down 115 from 222 the previous year and more than 450 fewer than the 561 hired in 2023. LG Chem hired 613 new employees last year, a drop of 98 from the prior year, while Hanwha Solutions hired 319, down 50. Combined, the three companies hired 1,039 new employees last year, roughly 20 percent — or 263 people — fewer than the 1,302 hired the year before.

The hiring pullback reflects efforts to reduce fixed costs amid persistent losses. All three companies posted deficits in their petrochemical operations last year due to a supply glut originating from China. To shore up their finances, they have been selling non-core assets while simultaneously scaling back recruitment, aiming to lower the fixed costs that come with adding headcount.

A near-term recovery in hiring looks unlikely. Uncertainty surrounding petrochemical market conditions — driven in part by China's continued capacity expansion — remains unresolved. The three companies did return to profit in the first quarter of this year, but industry officials attribute that largely to a lagging effect from the Middle East war, which delayed the impact of raw material price movements. With ceasefire negotiations stabilizing raw material prices, the industry now fears a reverse-lagging effect could weigh on second-half results.

Ethylene margins, a key profitability benchmark for petrochemical companies, are already trending downward. According to the Ministry of Trade, Industry and Energy, ethylene margins stood at $163 per ton as of mid-June, nearly half the $315 per ton recorded in May and well below the breakeven threshold of $250 per ton.

Engineering plastics produced by Lotte Chemical. [Provided by Lotte Chemical]

Even amid the prolonged downturn, the three companies have not let up on investment in high-value materials, having concluded that clinging to a business model built around basic petrochemical products could threaten their survival. They are spending on research and development at levels comparable to previous years. LG Chem's R&D expenditure last year came to 1.06 trillion won ($681 million), roughly in line with the 1.1 trillion won spent in 2024.

LG Chem is going further, planning to invest 15 trillion won in R&D through 2035 to build out future industries. About 70 percent of that will go toward developing materials for semiconductors, mobility and robotics. Through this investment push, the company aims to grow its electronic materials business to 2 trillion won by 2030.

Lotte Chemical is building up its capabilities in engineering plastics, a material drawing attention for its applications in robotics. Its subsidiary Lotte Engineering Plastics is considering mass-producing super engineering plastics at the Yulchon compounding factory, which is scheduled to be completed in the second half of this year. Hanwha Solutions, meanwhile, is working to diversify its cable materials portfolio, including cross-linked polyethylene.

yeongdai@heraldcorp.com