Sou Hu Cai Jing·2025-09-12 01:41Core Viewpoint - The South Korean petrochemical industry, facing severe challenges, is experiencing significant losses among its major companies, prompting government intervention for structural reforms [1][2][3]. Industry Overview - The petrochemical sector is South Korea's fourth-largest export industry, but it is currently in a crisis, with major players like Lotte Chemical, LG Chem, Hanwha Solutions, and Kumho Petrochemical reporting substantial losses in the first half of 2025 [1][2][3]. - The Bank of Korea reported a 7.8% year-on-year decline in sales for the petrochemical industry, marking four consecutive quarters of negative growth since Q3 2024 [1][3]. Financial Performance - The "big four" petrochemical companies in South Korea are projected to incur a total loss of 878.4 billion KRW (approximately 5.1 million RMB) in 2024, with an additional loss of nearly 500 billion KRW in the first half of 2025 [1][3]. - The overall financial outlook for the industry suggests that losses may continue to expand throughout 2025 [1][3]. Structural Challenges - The industry's heavy reliance on imported raw materials has exacerbated cost pressures, with average sales costs rising to 98.6% in 2025, up from 87.6% in 2021 [4]. - The increase in electricity prices, which have risen by over 65% since 2022, has further strained production costs, contributing to the financial difficulties faced by major petrochemical companies [4]. Market Dynamics - Chevron's recent announcement to increase investments in South Korea has raised concerns about foreign control over the country's key industries during a downturn [1][8]. - The South Korean government has identified the petrochemical sector for restructuring, but industry responses have been slow, with many companies hesitant to implement necessary reforms [1][6][7]. Future Outlook - The ongoing crisis in the petrochemical industry is prompting discussions about potential mergers and acquisitions, as companies face existential challenges [6][7]. - There is a growing concern that increased foreign investment could lead to a loss of autonomy for South Korean firms, impacting the overall supply chain and profitability of the domestic manufacturing sector [11].