![A petrochemical industrial complex restructuring plan for the Yeosu National Industrial Complex [Ministry of Trade, Industry and Energy]](https://wimg.heraldcorp.com/news/cms/2026/07/22/news-p.v1.20260722.d92b6a23d1d24f30a858ebfd43da3510_P1.jpg)
The government has approved "Yeosu Project No. 1," the second restructuring plan for South Korea's struggling petrochemical industry, which has been battered by a supply glut from China. Related ministries will jointly provide a support package of more than 700 billion won ($474 million).
With restructuring plans now approved for both Daesan and Yeosu, the domestic petrochemical industry's overhaul is expected to accelerate. However, Ulsan — one of the country's three major petrochemical complexes — has yet to put forward a concrete restructuring plan, leaving it as the last remaining variable.
The Ministry of Trade, Industry and Energy said Wednesday it had given final approval to a petrochemical restructuring plan for the Yeosu National Industrial Complex, submitted jointly by four companies: Yeochun NCC (naphtha cracking center), Lotte Chemical, Hanwha Solutions and DL Chemical.
The approval marks the second restructuring case in the domestic petrochemical industry, following the "Daesan Project No. 1" announced in February, which involved HD Hyundai Oilbank, HD Hyundai Chemical and Lotte Chemical.
The core of the plan calls for closing Plant 2 of Yeochun NCC's three facilities — Plant 3 has already been shut down — and merging the remaining Plant 1 with Lotte Chemical's Yeosu factory to form a new joint entity.
Under the plan, shutting down Plant 2, with an annual capacity of 920,000 tons, and Plant 3, with 470,000 tons, will reduce Yeochun NCC's ethylene production capacity from 2.28 million tons to around 900,000 tons per year. The three participating companies — Lotte Chemical, Hanwha Solutions and DL Chemical — will each hold a one-third stake in the new entity, cutting combined annual ethylene production capacity by about 1.4 million tons.
Hanwha Solutions and DL Chemical, which each hold a 50 percent stake in Yeochun NCC, will conduct a paid-in capital increase totaling 545 billion won — 272.5 billion won each — to repay Yeochun NCC's debt. They will also invest an additional 253.2 billion won for conversion to high-value products and infrastructure development, bringing total investment to 800 billion won.
With Yeochun NCC set to idle ethylene facilities totaling 1.4 million tons of capacity, the industry's voluntary production cuts are increasingly likely to exceed the government's reduction target of up to 3.7 million tons. Earlier, at the Daesan complex, Lotte Chemical agreed to halt operations at a plant with 1.1 million tons of capacity and form a joint venture with HD Hyundai Oilbank.
On the downstream side, where finished products are made, each company's most competitive core businesses will be folded into the new entity. The new company plans to integrate DL Chemical's polyethylene (PE), Hanwha Solutions' PE and petroleum resin, and Lotte Chemical's basic materials operations, shifting its business toward high-value products such as medical-grade low-density polyethylene (LDPE) and functional polyolefin elastomers (POE) for automotive and wire applications.
The government will support a smooth transition with a joint ministerial package of more than 700 billion won. The largest component is 650 billion won in financial support.
Some 450 billion won in new funds for facility integration and the shift to high-value products will be channeled through creditor financial institutions. Debt repayment on agreed obligations will be deferred and existing financing terms maintained through the end of 2029, covering the full restructuring period. The Korea Trade Insurance Corporation will provide up to 200 billion won in import insurance, including discounts of up to 30 percent on import insurance premiums and preferential guarantee limits of up to twice the standard ceiling.
Tax and regulatory support will run in parallel, including a 75 to 100 percent reduction in acquisition and registration taxes arising from corporate splits and mergers, an extended corporate tax deferral period, a shortened merger review period — cut from 120 days to 90 days — and permission to carry over existing licenses and permits.
Zero-tariff treatment on imported naphtha and crude oil used to produce naphtha will be extended through the end of this year to ease cost burdens. The government also plans to ease restrictions on overlapping heat-supply zones, lower shared pipeline rack rental fees, allow the transfer of chemical substance registrations, and expand employment retention subsidies, job-transition training support and regional investment promotion grants. Starting this year, 24.8 billion won will go toward three priority mid- to long-term research and development projects, and companies will be steered toward new investment in high-value and eco-friendly areas through designation under the Restriction of Special Taxation Act's new-growth and source-technology provisions.
While Daesan and Yeosu have moved ahead with restructuring, the Ulsan complex — one of the country's key petrochemical hubs — has still not produced a concrete restructuring plan. Companies there have less incentive to cut capacity following a recent rebound in earnings, and the calculus has grown more complicated with S-Oil's Shaheen Project — a roughly 9 trillion won investment — set to begin trial operations by the end of this year before moving to full production next year.
The government is pressing Ulsan to act. Deputy Minister of Trade, Industry and Energy Moon Shin-hak said the approval "carries great significance as it marks the full-scale start of restructuring at Yeosu, the country's largest chemical complex," adding that "the path of preemptive, voluntary structural reform — a road never taken before — will serve as an important milestone in industrial policy."
oskymoon@heraldcorp.com
