South Korea¡äs Small-Scale Naphtha Cracking Units Face Shutdown
2025-9-16
Recently, South Korean industry analysts stated that due to oversupply, the country¡äs petrochemical industry has launched a comprehensive restructuring. Small-scale independent naphtha cracking units may face shutdown, and some units might adopt mergers to cope with the crisis. This adjustment will impact the demand of South Korea, the world¡äs largest naphtha importer.
Earlier, South Korea¡äs Ministry of Trade, Industry and Energy revealed that the country¡äs top 10 petrochemical enterprises have reached an agreement to cut naphtha cracking capacity by 2.7 million to 3.7 million tons per year, which is equivalent to 25% of South Korea¡äs current total capacity. The move aims to ease the long-term oversupply situation and improve the industry¡äs profit margins. This scale far exceeds market expectations; South Korean petrochemical enterprises need to submit specific implementation plans by the end of the year, and the government will promote the restructuring through measures such as financial support and tax incentives.
Analysis institutions pointed out that the impact of this restructuring of South Korea¡äs petrochemical industry on naphtha demand is likely to be greater than that on liquefied petroleum gas (LPG). Currently, 82% of South Korea¡äs ethylene production relies on naphtha as raw material. Although using imported U.S. ethane to produce ethylene can be an alternative, this requires investment in building new infrastructure, which is difficult to achieve in the short term.
Analysis institutions predict that with the optimization and adjustment of ethylene capacity, the capacity of downstream derivatives such as polyolefins, aromatics and ethylene glycol in South Korea will also decrease accordingly, and the overall scale of the petrochemical industry chain will show a shrinking trend.
Earlier, a spokesperson for SK Innovation said that the company is considering various plans, including shutting down a naphtha cracking unit. Analysts said that YNCC, South Korea¡äs third-largest ethylene producer, may close 1 to 2 of its 3 cracking units. Hyundai Heavy Industries is negotiating with Lotte Chemical on acquiring its naphtha cracking units or merging businesses. Lotte, South Korea¡äs second-largest ethylene producer, has not yet commented on this.
Earlier, South Korea¡äs Ministry of Trade, Industry and Energy revealed that the country¡äs top 10 petrochemical enterprises have reached an agreement to cut naphtha cracking capacity by 2.7 million to 3.7 million tons per year, which is equivalent to 25% of South Korea¡äs current total capacity. The move aims to ease the long-term oversupply situation and improve the industry¡äs profit margins. This scale far exceeds market expectations; South Korean petrochemical enterprises need to submit specific implementation plans by the end of the year, and the government will promote the restructuring through measures such as financial support and tax incentives.
Analysis institutions pointed out that the impact of this restructuring of South Korea¡äs petrochemical industry on naphtha demand is likely to be greater than that on liquefied petroleum gas (LPG). Currently, 82% of South Korea¡äs ethylene production relies on naphtha as raw material. Although using imported U.S. ethane to produce ethylene can be an alternative, this requires investment in building new infrastructure, which is difficult to achieve in the short term.
Analysis institutions predict that with the optimization and adjustment of ethylene capacity, the capacity of downstream derivatives such as polyolefins, aromatics and ethylene glycol in South Korea will also decrease accordingly, and the overall scale of the petrochemical industry chain will show a shrinking trend.
Earlier, a spokesperson for SK Innovation said that the company is considering various plans, including shutting down a naphtha cracking unit. Analysts said that YNCC, South Korea¡äs third-largest ethylene producer, may close 1 to 2 of its 3 cracking units. Hyundai Heavy Industries is negotiating with Lotte Chemical on acquiring its naphtha cracking units or merging businesses. Lotte, South Korea¡äs second-largest ethylene producer, has not yet commented on this.