Tough slog in S Korea’s petchem industry spells disappointing 2024 financial results; will government's recent plan help weather the storm?

South Korea’s petrochemical sector has been grappling with challenges amid a global economic downturn, as a result of which major companies continue to report either slumping profits or even widening losses in both their quarterly and annual results. The world’s one of largest PP, PE exporters has been buckling under declining demand, oversupply and lack of competitive feedstocks, highlighting the urgent need for structural reforms given major profitability problems.

Now the question is whether the recently released policies by the government help stop the hemorrhage in the industry for key producers facing financial headwinds.

Petrochemical producers continue to see weaker results

Hanwha, Lotte Chemical post wider net losses

Hanwha Solutions’ net loss expanded to 1.2896 trillion won ($889 million) from 88 billion won ($60 million) in 2023. Hanwha reported a consolidated operating loss of 300.2 billion won ($207 million) for 2024, a significant shift from the previous year’s operating profit of 579.2 billion won ($400 million).

In the chemicals segment, Hanwha reported an operating loss of 121.3 billion won ($84 million), citing global economic downturn concerns.

South Korea’s Lotte Chemical Corp. reported that its operating losses widened by 157% for 2024, reaching 895 billion won ($619.62 million). This marked the company’s largest operating loss since 2011. Financial data from before 2011 was not publicly available.

LG Chem, Kumho, SK Petrochemicals report declining profits

LG Chem, South Korea’s leading chemical company , reported a net income of 515 billion won ($356 million) in 2024, down by 74.9% from 2.05 trillion won ($1.42 billion) in 2023. Operating profit declined by 63.8% year-on-year to 916.79 billion won ($634 million) from 2.52 trillion won ($1.74 billion).

Another South Korean producer, Kumho Petrochemical Co. reported a 22% decline in net income for 2024, totaling 348.5 billion won ($238.5 million). The company posted an operating profit of 272.8 billion won ($186.7 million), down from 359 billion won ($245.7 million) the previous year.

SK Chemicals posted an operating profit of 125.3 billion won ($85.8 million) for the full year 2024, down from 516.5 billion won ($353.7 million) in 2023. The company’s revenue for 2024 was 10.35 trillion won ($7.1 billion), down from 10.74 trillion won ($7.4 billion) in 2023.

Liquidity concerns push surging bond issuances

In early 2025, seven major companies including LG Chem, SK Incheon Petrochem, Hanwha TotalEnergies Petrochemical, SK Geo Centric, HD Hyundai Chemical, Hansol Chemical, and others reported planning to issue corporate bonds totaling up to 2 trillion won ($1.37 billion) to pay back debts.

South Korea still shines out with big PP and PE export volumes but value lags behind

South Korea has been the world’s second largest PP supplier following Saudi Arabia’s lead closely, according to ChemOrbis Stats Wizard Pro, having an average share of 12% in overall global PP trade over the past five years. Hitting a record-high back in 2021, PP exports faced yearly declines in the following two years before going back up in 2024 to near their all-time-high.

In the PE market, steady growth has been maintained over the years and exports hit their highest level last year, although it still stood slightly below their 2024 PP exports. This has also pushed South Korea up in the list of top PE exporters of the globe to the 3rd place, outpacing Singapore and Iran.

China has been South Korea’s main export destination for both PP and PE. Despite still having the lion’s share, exports to China have shrunk in recent years particularly and more visibly for PP, needless to say due to China’s rapidly growing domestic capacity, while Vietnam has been standing out as the second largest destination with rising share in South Korea’s exports.

Although PE export tonnages are at their record-high, the value of the total exports in 2024 was at its lowest of the past four years. Likewise, the value of the total PP exports in 2024 were around 500 million USD below 2022, when a very similar amount of PP exports were made, ChemOrbis Stats Wizard suggests. These all underline the shrinking profitability of the South Korean petrochemical industry.

Will government aid pull the industry out of the woods?

Given the pivotal position of South Korea in global PP and PE markets as a major supplier, local industry sources highlight the importance of government support for the petrochemical industry.

South Korea announced a comprehensive plan on December 23 to support its struggling petrochemical industry, following an eight-month collaboration between the Ministry of Trade, Industry, and Energy and industry stakeholders. The measures aim to tackle the sector’s structural challenges, including overcapacity and declining competitiveness.

In early February, the government revised regulations to make it easier to designate areas with a high concentration of petrochemical corporations as "industrial crisis response areas." The new policy is anticipated to favor key petrochemical centers like Yeosu, Ulsan, and Daesan by offering enhanced resource access to counter economic challenges and foster ongoing sector growth. Crisis response areas can receive subsidies, loans, and grants, with loan amounts capped at 1 billion won ($692 million) and favorable terms.

Lee Deok-hwan, a chemistry professor at Sogang University, mentioned that the government’s support policies, including the recent revision, could act as a “short-term boost” for the industry. He emphasized the need for a comprehensive “master plan” to drive rapid restructuring and help the industry, which is vital for domestic energy and material supply, overcome the crisis, quoted one local media source.

Voluntary restructuring will be key to success: Plant closures, M&As and sell-offs around the corner

The recently revealed government policy, seen as critical in reviving the industry, indeed aims to make this aid far beyond financial impetus as it encourages businesses to go through voluntary restructuring including plant closures, sales, joint ventures, efficiency improvements, and new mergers and acquisitions.

To support these transformations, the government plans to introduce legal reforms and provide various financial and tax incentives. This includes extending the timeframe for acquiring full ownership of holding company shares from three to five years and simplifying merger reviews with the Korean Fair Trade Commission (FTC), the nation’s economic competition regulator. Additionally, a dedicated consultation channel between the ministry and the FTC will speed up reviews and aid restructuring initiatives.

Margin squeeze force SEA producers to indefinite shutdowns

Lotte Chemical in Malaysia, JG Summit in the Philippines and Long Son Petrochemical in Vietnam have shut their crackers and PP, PE plants indefinitely amid profitability issues.

With their naphtha crackers, these regional producers lack competitive power against the growing import pressure from China, the Middle East and the US in a stagnating demand market.

How about the cost side? What subsidies are planned to improve cost efficiency in Korea?

To avoid a situation like in Southeast Asia, the government also aims to reduce costs by planning the following:

• Extend duty-free period for crude oil used in naphtha production until the end of 2025.



• Refund import surcharges on LNG used as industrial raw materials.



• Implement “fast-track” approval for ethane terminal and storage tank construction like in the case of SCG in its Long Son Petrochemicals (LSP) plant to use U.S.-sourced ethane, although where to get the ethane remains unknown for Koreans amidst Trade Wars 2.0



• Expand electricity rate options through distributed power trading.



• Rationalize safety regulations.



• Support R&D for specialized, high-value-added petrochemicals with plans to unveil “R&D Investment Roadmap for 2025-2030” in the first half of this year.