SKC and Kuwait's PIC have decided to sell SK PIC Global, a petrochemical raw material producer they jointly established five years ago. This move is interpreted as SKC's step to withdraw from its chemical business amid a global petrochemical industry downturn caused by oversupply from China. While other domestic petrochemical companies are reducing production through mergers, restructuring through sales is also underway.

● Sale of SK PIC Global amid chemical restructuring

According to the petrochemical and private equity fund (PEF) industries on the 13th, SKC and Kuwait's state-owned petrochemical company PIC have decided to sell 100% of SK PIC Global's shares and are seeking acquisition interest from domestic and international chemical companies and PEFs.

SK PIC Global was established in 2020 by spinning off SKC's chemical business division. Immediately after the spin-off, 49% of the shares were sold to PIC for KRW 535.8 billion. Currently, SKC holds 51% and PIC holds 49% of the company's shares. Although there was speculation that SKC might sell SK PIC Global to PIC, it appears that they have ultimately decided on an external sale.

SK PIC Global is the first company in Korea to commercialize propylene oxide (PO), a raw material for polyurethane (PU) used in automotive interiors. It produces high-value-added chemical products such as propylene glycol (PG), used in pharmaceuticals and food additives, and dipropylene glycol (DPG), a raw material for cosmetics and perfumes.

In 2021, when the production of these products was booming, the company recorded its highest-ever operating profit of KRW 332.2 billion. However, the influx of low-priced Chinese PO and PG has deteriorated its performance. The company turned to an operating loss in 2023, reporting an operating loss of KRW 52.6 billion last year and KRW 33.4 billion in the first half (January to June) of this year.

The chemical industry sees that the impact of oversupply from China extends beyond naphtha cracking centers (NCCs) producing ethylene and propylene to the downstream sectors (distribution and sales) that process these into PO and PG. As a result, there are expectations that the current scope of petrochemical restructuring, which includes NCC mergers and production cuts, will widen.

● Intense behind-the-scenes restructuring by industrial complexes

Currently, domestic chemical companies are engaging in behind-the-scenes negotiations by industrial complex to submit restructuring plans to the government by the end of the year. The integration of NCC companies, which have been directly hit by oversupply from China, is particularly crucial.

The most advanced discussions are taking place between Lotte Chemical and HD Hyundai Oilbank within the Daesan Petrochemical Complex in Chungnam, where they are discussing operational efficiency through the consolidation of NCC facilities. Both companies have experience operating the joint venture HD Hyundai Chemical, which has facilitated dialogue compared to other companies.

In Ulsan, integration between SK Geocentric and Korea Petrochemical Ind. Co. is reportedly under review. The Ulsan Industrial Complex has an annual ethylene production capacity of 1.76 million tons, which is smaller compared to Yeosu (6.27 million tons) and Daesan (4.78 million tons).

The biggest challenge lies in the Yeosu Industrial Complex. The absolute reduction volume is significant, and with many stakeholders such as Yeochun NCC, LG Chem, and Lotte Chemical, negotiations are not expected to proceed smoothly. Therefore, there are considerations to involve not only petrochemical companies but also refining companies to facilitate restructuring. A petrochemical industry official stated, "The scope of restructuring in the petrochemical industry is expanding due to the impact of oversupply from China," adding, "In addition to mergers or facility closures to reduce production, sales and other measures must also be implemented."

Popular News