South Korea's Plastics Industry Faces Another Storm as High Industrial Electricity Prices Exacerbate Structural Crisis

On September 3, ZhuanSu Vision observed that Seosan in South Chungcheong Province and Yeosu in South Jeolla Province, South Korea, were successively designated as “industrial crisis preemptive response areas,” marking the official entry of Korea’s plastics and chemical industry into a phase of emergency government intervention. This recession, which began with a global oversupply, has sharply worsened due to a 73%-82% surge in industrial electricity prices over four years—Grade B high-voltage industrial electricity rates soared from 0.54 RMB per kWh in 2022 to 0.95 RMB per kWh, directly driving up production costs for enterprises.

Lotte Korea Yeosu Plant, image source: Lotte Chemical

Structural dilemma: the more you sell, the worse the loss.

As South Korea's plastic and chemical industry faces relentless decline, the South Korean government has designated Seosan in Chungcheongnam-do and Yeosu in Jeollanam-do as industrial crisis preemptive response regions. However, the omission of an electricity bill reduction plan from the financial and tax support measures has sparked significant discontent within the industry. It has been pointed out that the global supply glut and soaring electricity prices have pushed South Korea's plastic and chemical industry into a "the more you sell, the more you lose" structure, which has not yet been resolved.

Taking Lishui Industrial Park as an example, companies such as LG Chem and GS Caltex have jointly requested to lower the electricity price to 0.83-0.85 RMB per kilowatt-hour. Although the reduction is only 10%, it has become a critical bottom-line demand concerning their survival.

Industry data reveals a harsh reality: in the first half of this year, the average sales cost ratio of nine major plastic chemical companies in South Korea reached 98.6%, an increase of 11 percentage points compared to 2021. Leading companies such as HD Hyundai Chemical and SK Geo Centric even experienced "reverse profits," with cost ratios exceeding 100%. The ethylene price spread has long hovered below the breakeven point of $220 per ton, while the cost of raw material imports continues to rise due to fluctuations in international oil prices.The phenomenon of "increased volume but decreased profit" is particularly evident in Suwon City, South Korea.The local national tax revenue plummeted from 18.72 billion RMB in 2021 to 9.87 billion RMB, a decrease of 47.1%. The South Korean government's response measures have sparked strong criticism from the industry.

Image source: Yonhap News Agency

Although South Korea has designated Seosan and Yeosu as industrial crisis response zones and promised to provide stabilizing funds, low-interest loans, and other financial support, it has not addressed the core demand of electricity fee reductions. Korea Electric Power Corporation, citing a debt burden of 205 trillion won and WTO subsidy regulations, firmly opposes industry-wide fee reductions. President Lee Jae-myung’s recent statement that “electricity price increases are inevitable” has been interpreted as a commitment to reforms that pass on the costs of renewable energy.

Low-cost advantage reshapes the regional industrial chain

In the context of changes in the global plastic chemical industry landscape, the role of China is becoming increasingly crucial. From January to July 2025, the bilateral trade volume between China and South Korea reached USD 184.749 billion, with China’s trade deficit with South Korea expanding to USD 18.304 billion, reflecting the Korean industry's dependence on the Chinese market. Meanwhile, China’s industrial electricity price has remained stable at 0.61 RMB per kilowatt-hour, only 65% of the level in Korea. Furthermore, ultra-high voltage transmission technology enables clean energy from western China to be delivered to the east at a cost of just 0.3 RMB per kilowatt-hour, creating a significant cost advantage.

This difference is directly reflected in industrial competitiveness: China's polyethylene and polypropylene capacities continue to expand, gradually replacing Korean products in the Asian market. Li Dehuan, honorary professor at Xijiang University, pointed out that the phenomenon of industrial electricity prices being higher than residential electricity prices—a "price inversion"—is rare globally and will ultimately be passed down to the consumer end through the industrial chain.

More critically, the crisis in South Korea's plastic chemical industry could trigger a chain reaction, as the industry accounts for over 30% of the economic output in Seosan and Yeosu. If companies undergo large-scale production cuts or relocations, it could undermine the economic foundations of these localities. In comparison, China maintains low electricity prices through market mechanisms, and the United States reduces costs through the shale gas revolution. South Korea's energy policy is undergoing systemic reevaluation.

Epilogue:

Facing the rapid rise of Chinese enterprises, South Korea’s plastic chemical giants have initiated strategic adjustments: LG Chem has closed some plants and exited the styrene monomer market, while Lotte Chemical has suspended its synthetic rubber business in Malaysia, shifting its focus to renewable energy materials and high value-added products. However, S&P Global warns that without fundamental restructuring, Korean companies may further lose market share amid global overcapacity. This harsh winter may be a crucial turning point for the Korean industry, shifting from scale expansion to technological innovation.