South Korea’s YNCC to Mothball No. 3 Aromatics Complex as Petchem Losses Mount
Yeochun NCC or YNCC plans to suspend all operations at its No. 3 complex in Yeosu from late February, effectively mothballing the site in the long term as South Korea’s petrochemical downturn intensifies, according to local media reports.
The shutdown will encompass both the olefins and aromatics units at the complex. YNCC’s No. 3 naphtha cracker, with a capacity to produce 470,000 metric tons per year of ethylene, has been offline since August due to persistently weak margins, as previously reported by OPIS. The decision now extends to the associated aromatics facilities, which had continued operating despite the cracker outage.
The move reflects mounting financial stress, prolonged losses and growing pressure from state-linked lenders for deeper restructuring across the Yeosu Industrial Complex. Market participants described the decision as a “sustainable shutdown” rather than a temporary outage, underscoring the severity of the industry’s structural malaise.
Hanwha Solutions and DL Chemical, YNCC’s joint shareholders, agreed last week to halt all remaining processes at Plant 3, industry sources said. While final approval rests with senior management, the plan has already been communicated internally. Equipment will not be dismantled, but preserved through nitrogen blanketing and other measures, indicating a mothballing strategy rather than permanent closure.
Plant 3 began commercial operations in 1989 and comprises the No. 3 cracker alongside an aromatics unit that converts naphtha into benzene, toluene and xylene. The aromatics plant has a capacity of around 110,000 mt/year benzene, 60,000 mt/year toluene and 30,000 mt/year xylene. A substantial share of this output had been supplied to DL Chemical.
That supply arrangement has increasingly weighed on profitability, according to people familiar with the matter. YNCC had been selling BTX feedstocks to its shareholders at prices below prevailing market levels, exacerbating cash burn as margins across the petrochemical chain collapsed. Company officials said internal assessments concluded that the losses were no longer sustainable. Remaining BTX inventories are expected to be shipped by the end of March, following the late-February halt.
Financial strain has been compounded by tightening oversight from Korea’s policy lenders. The Korea Development Bank, YNCC’s main creditor, has extended approximately KRW 424 billion ($294.35 million) in loans and has demanded additional capacity-reduction plans from major operators in Yeosu, including Lotte Chemical, Hanwha Solutions and DL Chemical. Officials have signaled that further financial support will be contingent on tangible progress toward consolidation or closures.
The fate of other assets in Yeosu is also under review. Options under discussion include permanently shuttering YNCC’s No. 3 plant, integrating assets with Lotte Chemical’s nearby facilities, or closing additional units. Industry sources said YNCC’s older No. 1 plant and its less efficient No. 2 plant are among the assets being evaluated, while Lotte Chemical’s Yeosu operations are viewed as less likely candidates given the company has already submitted restructuring plans for its Daesan complex.
Labor implications are expected to follow. As shutdown timelines are finalized, discussions around redeployment and organizational restructuring are likely to intensify, adding to job security concerns in Yeosu, where repeated cutbacks have already rippled through the local workforce.
YNCC’s near-term liquidity remains uncertain. About KRW 210 billion of debt matures in March, roughly 2.5 times the company’s available cash, according to industry estimates. The company narrowly avoided default last August after securing emergency shareholder loans, but no comprehensive refinancing plan has yet been disclosed.
The troubles at YNCC have become emblematic of broader distress across South Korea’s petrochemical sector, one of the country’s major export engines. Utilization rates across multiple chains have slipped below breakeven, forcing asset sales and shutdowns at peers including LG Chem and Lotte Chemical. A Boston Consulting Group study commissioned by the Korea Chemical Industry Association has warned that nearly half of domestic petrochemical producers could fail within three years without urgent structural reform.
Impact on Benzene
The mothballing of YNCC’s No. 3 aromatics plant removes 110,000 mt/year of benzene capacity from South Korea’s supply base, tightening regional fundamentals at a time when Asian benzene balances have already been influenced by volatile derivative demand.
“While the absolute volume is modest relative to Northeast Asia’s total benzene capacity, market participants said the shutdown could have an outsized psychological impact,” said a Singapore-based trader.
South Korea is a key exporter of benzene into China and Southeast Asia, and the loss of a steady domestic producer reduces spot availability, particularly during periods when other plants face maintenance or feedstock constraints.
In the near term, the impact is likely to be most visible within South Korea. Domestic benzene supply had already been constrained by the August shutdown of YNCC’s No. 3 cracker, which curtailed upstream aromatics feedstock flexibility. With the aromatics unit now offline, buyers may need to draw down inventories, potentially lifting domestic benzene discussions on an ex-tank basis.
Regionally, the supply-side impact is landing against a backdrop of already surging benzene prices. FOB Korea benzene values have rallied sharply this month, underpinned by strong downstream pull from styrene monomer. The midpoint of the OPIS FOB Korea assessments climbed 15.2% since the start of the year, rising from $663/mt FOB Korea on Jan. 2 to $764/mt FOB Korea by Jan. 23, reflecting firming Chinese demand amid improvements in downstream production margins.
Downstream fundamentals have reinforced the upside. SM prices have risen even faster than benzene, providing margin support which has allowed producers to absorb higher feedstock costs. The midpoint of the OPIS CFR China SM assessment jumped nearly 20%, from $830/mt CFR China on Jan. 2 to $960/mt CFR China by Jan. 23. As a result, margins for standalone SM producers moved back above breakeven levels of around $200/mt and have remained stable since Jan. 7, according to OPIS data. The SM-to-benzene spread widened from $167/mt on Jan. 2 to a high of $231/mt by Jan. 22, signaling a structurally more supportive environment for benzene prices should further supply rationalization materialize in South Korea.
Still, the YNCC shutdown reinforces a broader narrative of structural contraction in Northeast Asia’s aromatics chain. For benzene, a market plagued by oversupply for months, incremental capacity withdrawals—even small ones—are increasingly being viewed as necessary steps toward restoring balance.
—Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com