South Korea 1.39 Million Tons Of Ethylene Production Capacity Permanently Exits

On July 22, South Korea’s Ministry of Trade, Industry and Energy officially approved the “Yeosu No. 1 Business Restructuring Plan” for the Yeosu Industrial Complex. The plan was jointly submitted by four companies: Yeochun NCC (YNCC), Lotte Chemical, Hanwha Solutions, and DL Chemical. This marks the second large-scale restructuring of South Korea’s petrochemical industry, following the restructuring of the Daesan complex in February.

1.39 million tons of ethylene permanently disappear.

The core of the restructuring plan is capacity reduction. Lichuan NCC will permanently shut down its No. 2 and No. 3 naphtha crackers. The No. 2 unit has an annual capacity of 920,000 tonnes, while the No. 3 unit has an annual capacity of 470,000 tonnes, reducing ethylene capacity by a combined 1.39 million tonnes per year. After the shutdowns, Lichuan NCC’s annual ethylene capacity will fall from 2.28 million tonnes to about 900,000 tonnes, a reduction of more than 60%.

Unlike the previously discussed production cuts, reduced operating rates, and temporary shutdowns in the market, this time it is a permanent exit. South Korea’s long-term ethylene capacity is about 14.7 million tons per year, meaning this would cut nearly 10% of the country’s ethylene capacity in one move.

The Three Families Partition Jin: Lotte, Hanwha, and DL Restructure

Lotte Chemical will split the naphtha cracking center (NCC) and polyethylene/polypropylene basic materials business of the Lishui plant and merge them with the Lichuan NCC to establish a new unified legal entity. The new company will be jointly owned by Lotte Chemical, Hanwha Solutions, and DL Chemical, each holding one-third of the shares.

DL Chemical’s polyethylene business and Hanwha Solutions’ polyethylene and petroleum resin businesses will also be integrated into the new entity. The new company plans to shift toward high value-added products such as medical-grade LDPE and adhesive-grade POE.

KRW 800 billion in self-rescue measures, KRW 700 billion in government support

Hanwha Solutions and DL Chemical will each conduct a paid capital increase of 272.5 billion won, totaling 545 billion won to repay the existing debts of Lichuan NCC. The two companies will also make in-kind contributions through profitable businesses such as polyethylene and petroleum resins. In addition to 253.2 billion won for pipeline infrastructure and high-value-added product investments, the total self-rescue investment from the enterprises amounts to 800 billion won (approximately 576 million USD).

The South Korean government will provide over 700 billion won (approximately 505 million USD) in support, including more than 650 billion won in financial support, tax incentives, regulatory easing, employment support, and research and development funding.

After Daesan, the restructuring of South Korea's petrochemical industry has entered its second phase.

This restructuring is a key implementation measure of South Korea’s petrochemical capacity reduction policy launched in August 2025, with the goal of cutting annual ethylene production capacity by 2.7 million to 3.7 million tons.

In February 2026, the South Korean government approved the restructuring of the Daesan industrial complex, with Lotte Chemical and HD Hyundai Chemical being integrated to cut ethylene capacity by 1.1 million tons per year. The two rounds of restructuring in Daesan and Yeosu combined will reduce ethylene capacity by approximately 2.5 million tons per year.

Reuters reported that this restructuring will help ease the oversupply pressure in the ethylene market in Northeast Asia. Following the launch of the Daesan project and the approval of the Yeosu project, the South Korean government plans to initiate discussions on the restructuring of the Ulsan petrochemical complex as soon as possible.