Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
YNCC default risk reveals broken Hanwha-DL ties
Yeochun NCC's factory in Yeosu, South Jeolla Province / Newsis
By Park Jae-hyuk
Petrochemical industry crisis reaches alarming level
The prolonged downturn in the petrochemical industry has damaged the over-two-decade partnership between Hanwha Solutions and DL Chemical, which was formed for their joint venture, Yeochun NCC (YNCC).
The third-largest ethylene producer in Korea recently faced the risk of defaulting on a 310 billion won ($223 million) loan set to mature Aug. 21.
Having previously been hesitant to support YNCC, DL agreed Monday to inject up to 200 billion won into the joint venture, following Hanwha committing 150 billion won last month.
Their support gave YNCC temporary relief.
However, DL publicly criticized Hanwha for “irresponsibly” financing YNCC without addressing the underlying causes of its financial trouble. DL also asserted that Hanwha had been purchasing ethylene from YNCC at baselessly low prices.
“Hanwha’s moral hazard has undercut YNCC’s competitiveness,” DL said in a statement.
A Yeochun NCC union member hangs a banner in front of Hanwha Group's headquarters in Seoul, Tuesday, to thank the conglomerate for its financial support. Yonhap
Hanwha immediately rejected the accusation, insisting DL had actually benefited from unfairly low-priced ethylene supplied by YNCC.
“It was DL’s refusal to lend 150 billion won to YNCC that created this default risk in the first place,” Hanwha said in a statement. “Despite earning 2.2 trillion won in dividends from YNCC over the past 25 years, DL is distorting the facts as it faces strong public criticism.”
With tensions between the two chemical giants intensifying, YNCC has yet to determine when it will restart operations at its No. 3 factory, which was shut down last Friday in response to the industry downturn caused by an oversupply of Chinese petrochemical products and a global economic slowdown.
Additionally, the government has not come up with follow-up measures, since the previous administration announced plans last December to boost the petrochemical industry's competitiveness.
Despite the government's promise of follow-up measures during the first half of this year, a leadership vacuum after former President Yoon Suk Yeol's impeachment over his Dec. 3 martial law declaration has made it difficult to pursue government-led industry reforms.
While last year’s policies focused on financial assistance, petrochemical companies are calling on the government to exempt them from the Monopoly Regulation and Fair Trade Act, when they collaborate with competitors to streamline production.