Issue Briefs
Myopic Government Policy for Petchem in Peril: Shortcomings and Solutions
This Issue Brief points out the shortcomings of the policy to raise the competitiveness of the country’s petrochemical industry announced by the government on December 23, 2024, and suggests directions for improvement.
주요 내용
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On December 23, 2024, the Ministry of Trade, Industry and Energy (MOTIE) of South Korea announced a policy to raise the competitiveness of the country’s petrochemical industry. The announcement primarily envisions ① rationalizing surplus naphtha cracking facilities, ② strengthening the sector’s global competitiveness, and ③ transitioning to high-value-added specialty products and ecofriendly products. However, the policy seems to fall far short of rescuing the industry in several respects—its lukewarm restructuring plan, the focus of new investment support placed on merely keeping the sinking industry afloat, and the prolonged absence of effective research and development (R&D) plans.
The operating rate of naphtha cracking facilities has slumped to around 70-percent range. If it is to rebound to 90 percent or above, one-third of the current naphtha cracking facilities must be retired by 2030. With the looming risk of missing the golden hour for restructuring the industry while business conditions rapidly deteriorate, the Fair Trade Act needs to loosen its grip to facilitate M&A, government-led big deals.
The government, hand in hand with the Daesan Industrial Complex, is contemplating the construction of an ethane terminal and an ethane cracker. However, a colossal investment against the global race to carbon neutrality portends high risk, especially given the uncertainty surrounding South Korea’s price advantages over China and the Middle East.
There has been almost no discussion of key technologies required for transitioning the petrochemical industry. The petrochemical industry’s 2025-2030 R&D investment roadmap, slated to be released in the first half of 2025, must prioritize decarbonization technologies such as electrically heated furnaces, methane pyrolysis-driven hydrogen production, and heat pumps.
Keeping the industry afloat as it is not the answer. There is no time to lose. South Korea’s petrochemical sector must be frogmarched through transformation, even if the hour is already late. The government is urged to take decisive action with a clear vision.
※ 관련 보고서
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* This Issue Brief can be better understood in depth when read alongside A Net Zero Roadmap for South Korea’s Petrochemical Industry>, published in November 2024.
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2025.03.06 / Sugang Kim
