Thirteen Years of Partnership Ends: SK Group Bids Farewell to Sinopec-SK Wuhan Petrochemical

According to insiders on September 16, SK Geo Centric, a subsidiary of South Korea’s SK Group, is planning to sell its entire 35% stake in Sinopec-SK Wuhan Petrochemical Co., Ltd. The company is currently owned 65% by Sinopec and 35% by SK. The transaction is expected to be worth around 819.3 billion won (approximately USD 594 million). Potential buyers include Sinopec and several other Chinese companies.

From “Model Success” to “Loss-Making Struggle”
Sinopec-SK Wuhan Petrochemical was established in Wuhan in 2013 with a total investment of about 3.3 trillion won. It was a flagship project of SK’s “Insider in China” strategy. The plant was designed with an annual production capacity of 3.2 million tons, including 1.1 million tons of ethylene. At its peak, annual sales once neared 10 trillion won, with cumulative profits of around 2 trillion won, and it was hailed as a model case of China–Korea joint ventures.

However, since 2021, with China’s large-scale expansion of ethylene capacity and slowing domestic demand, the market has become oversupplied. From 2020 to 2023 alone, China’s annual ethylene output nearly doubled to 60 million tons. Intensified competition caused Sinopec-SK’s profits to decline sharply, leading to cumulative losses of over 1 trillion won in the past five years.

Industry Pressure and Structural Adjustments
The sale comes at a time when South Korea’s petrochemical industry as a whole is under pressure. As one of the world’s largest importers of naphtha, Korean petrochemical firms are being hit hard by China’s low-cost production capacity, which continues to squeeze profit margins. Industry insiders note that SK’s petrochemical restructuring is no longer limited to Korea but is now extending to its overseas assets. The group has made it clear that it will downsize businesses without a clear future.

Is Sinopec the Most Likely Buyer?
Market consensus suggests that Sinopec is the most likely buyer. As the world’s largest refining company, Sinopec processed 252 million tons of crude oil in 2023 and has an ethylene capacity of 13.5 million tons. Gaining full ownership of the Wuhan plant would not only simplify management but also integrate the facility into its “refining–chemical” value chain. Moreover, China’s tightening restrictions on foreign ownership further increase the likelihood of Sinopec taking full control.

SK’s New Direction: AI, Batteries, and Chips
For SK Group, proceeds from the sale will be channeled into future growth areas. The group has explicitly outlined its “ABC strategy,” focusing on Artificial Intelligence, Batteries, and Chips. By 2030, SK plans to invest 8.2 trillion won in these areas, including building a large AI data center in Ulsan in partnership with Amazon. Its subsidiary SK Hynix is strengthening advanced packaging capabilities for AI chips, while SK Innovation is developing energy storage and cooling systems to support data infrastructure. A person familiar with the deal commented: “Bulk chemicals are no longer SK’s growth engine. Its next chapter will be written in artificial intelligence and semiconductors.”