July 22, 2026 — South Korea's Ministry of Trade, Industry and Energy (MOTIE) has approved the "Yeosu No.1 Restructuring Plan" for the Yeosu petrochemical complex. The proposal was jointly submitted by Yeochun NCC (YNCC), Lotte Chemical, Hanwha Solutions, and DL Chemical, marking the country's second major petrochemical restructuring initiative following the Daesan project approved in February.
1.39 Million Tons of Ethylene Capacity to Be Permanently Retired
The centerpiece of the restructuring is a significant capacity reduction.
YNCC will permanently shut down its No. 2 and No. 3 naphtha crackers. The No. 2 unit has an annual ethylene capacity of 920,000 metric tons, while the No. 3 unit produces 470,000 metric tons per year. Together, the closures will permanently remove 1.39 million metric tons per year of ethylene capacity.
Following the shutdowns, YNCC's annual ethylene capacity will decline from 2.28 million metric tons to approximately 900,000 metric tons, representing a reduction of more than 60%.
Unlike previous production cuts, lower operating rates, or temporary shutdowns, these facilities will not restart. With South Korea's total ethylene capacity standing at around 14.7 million metric tons per year, the move will eliminate nearly 10% of the country's production capacity in a single step.
Lotte, Hanwha and DL to Form a New Joint Venture
As part of the restructuring, Lotte Chemical will carve out its Yeosu naphtha cracking center (NCC) and polyethylene/polypropylene base materials business and merge them with YNCC to establish a new integrated company.
The new entity will be equally owned by Lotte Chemical, Hanwha Solutions, and DL Chemical, with each company holding a one-third stake.
DL Chemical will contribute its polyethylene business, while Hanwha Solutions will transfer its polyethylene and petroleum resin operations into the new company. The joint venture plans to shift its portfolio toward higher-value products, including medical-grade LDPE and adhesive-grade POE.
Companies to Invest KRW 800 Billion, Government to Provide KRW 700 Billion in Support
Hanwha Solutions and DL Chemical will each inject KRW 272.5 billion through paid-in capital increases, totaling KRW 545 billion, to repay YNCC's outstanding debt.
Both companies will also contribute profitable businesses—including polyethylene and petroleum resin assets—as in-kind investments. Together with KRW 253.2 billion earmarked for pipeline infrastructure and high-value product investments, the companies' total self-funded commitment will reach approximately KRW 800 billion (about US$576 million).
The South Korean government will provide more than KRW 700 billion (approximately US$505 million) in support through financial assistance, tax incentives, regulatory relief, employment programs, and R&D funding.
Second Phase of South Korea's Petrochemical Restructuring
The Yeosu project represents another major step in South Korea's petrochemical restructuring strategy introduced in August 2025, which aims to reduce the country's annual ethylene capacity by 2.7 million to 3.7 million metric tons.
In February 2026, the government approved the restructuring of the Daesan petrochemical complex, under which Lotte Chemical and HD Hyundai Chemical agreed to integrate operations, involving 1.1 million metric tons per year of ethylene capacity.
Combined, the Daesan and Yeosu restructuring projects involve approximately 2.5 million metric tons per year of ethylene capacity.
According to Reuters, the restructuring is expected to ease the oversupply of ethylene in Northeast Asia. Following progress in Daesan and the approval of the Yeosu plan, the South Korean government is preparing to begin discussions on restructuring the Ulsan petrochemical complex, the country's third major petrochemical hub.
