LG Chem restarts Yeosu naphtha cracker after seven-month shutdown

LG Chem resumed operations at its No. 2 naphtha cracking center (NCC) in Yeosu, South Korea, on Monday, nearly seven months after suspending production due to disruptions in naphtha supplies from the Middle East.

According to a regulatory filing, the company restarted the facility, which has an annual ethylene production capacity of 800,000 tons. Operations had been suspended since March 23 amid naphtha supply disruptions stemming from geopolitical tensions in the Middle East.

The restart is seen as a move to minimize production disruptions ahead of scheduled maintenance at LG Chem’s No. 1 NCC, which has an annual ethylene production capacity of 1.2 million tons.

LG Chem said the decision does not conflict with the South Korean government’s broader restructuring efforts to reduce naphtha cracking capacity amid persistent oversupply in the petrochemical industry.

While the restart addresses short-term supply disruptions caused by geopolitical instability in the Middle East, the industry still faces the longer-term challenge of reducing excess production capacity.

Moody’s Ratings recently warned that structural pressures on South Korea’s petrochemical industry are unlikely to ease in the near term.

As China’s petrochemical self-sufficiency increases and domestic demand remains weak, South Korean producers that have traditionally relied heavily on exports to China face limited prospects for a sharp recovery or renewed export growth.

Moody’s estimated that planned ethylene capacity reductions of 5 million to 6 million tons in South Korea and Japan would be substantial but insufficient to resolve regional oversupply, given Asia’s total annual capacity of approximately 110 million to 130 million tons.

Meanwhile, restructuring efforts across South Korea’s major petrochemical complexes are progressing at different speeds.

In Daesan, a combined entity involving Lotte Chemical and HD Hyundai Chemical has been established, while restructuring involving Lotte Chemical and Yeochun NCC is underway in Yeosu.

The two projects are expected to reduce NCC capacity by approximately 2.5 million tons, still well below the government’s target of 3.7 million tons by the end of this year.

In Yeosu, LG Chem and GS Caltex have also submitted restructuring proposals, but discussions over integrated facility operations and capacity reductions have been prolonged.

In Ulsan, restructuring talks involving existing facilities have made limited progress, while S-Oil is preparing to begin operations at its Shaheen project, which will have an annual ethylene production capacity of 1.8 million tons.

Industry observers warn that adding new capacity before sufficient reductions are made at existing facilities could further aggravate South Korea’s petrochemical oversupply.