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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] SEOUL, Sept. 3 — The South Korean government has set a year-end deadline for restructuring in the petrochemical industry, prompting LG Chem and GS Caltex to open discussions on consolidating their naphtha cracking centers (NCC) in Yeosu.
According to industry sources, LG Chem has proposed selling its Yeosu NCC plant to GS Caltex, after which a joint venture formed by the two companies would operate the integrated facility. The move follows the government’s directive last month that major petrochemical producers cut NCC output by 2.7–3.7 million tons annually, and present concrete restructuring plans by the end of this year. Currently, Korea’s ten NCC facilities have a combined annual production capacity of about 14.7 million tons, meaning a reduction of 18–25% is required.
The talks between LG Chem and GS Caltex are drawing particular attention as they involve vertical integration between a refiner and a chemical producer—an approach that has been highlighted as the most likely restructuring scenario. By linking upstream refining operations with downstream petrochemical production, the companies could reduce costs and adjust NCC capacity while enhancing competitiveness in commodity chemical markets.
However, significant hurdles remain. The two firms must narrow differences over the valuation of the NCC assets, and GS Caltex would also need to secure approval from its major shareholder, Chevron, before any deal can move forward.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
