LG Chem is seeking solutions to revive its struggling petrochemical business. Splitting the petrochemical business and attracting foreign investments from the Middle East to create a joint venture are among the scenarios being discussed.
Vice Chairman Shin Hak-cheol of LG Chem responded to reporters’ questions about measures to improve petrochemical competitiveness after the regular shareholders’ meeting held at the LG Twin Towers in Yeouido, Seoul, on March 25, saying, “Sale is not the right expression. We are considering various strategic options, including JVs, from the perspective of securing raw material competitiveness.”
He explained, “It’s true that competitiveness in the upstream sector has become difficult due to China’s excessive capacity expansion. It’s not about selling, but about how we can secure raw material competitiveness and maintain partnerships.”
This suggests that LG Chem is contemplating forming partnerships with interested parties in the petrochemical business and receiving investment. The industry has been speculating about LG Chem’s potential for physical division of its petrochemical business followed by a JV with foreign capital. Vice Chairman Shin’s message seems to follow this scenario, aiming to reorganize the entire petrochemical business more efficiently rather than selling assets like Yeosu NCC Plant 2.
Given Shin’s mention of “securing raw material competitiveness,” there seems to be ample possibility for building partnerships with the Middle East, which is rich in crude oil. If Middle Eastern capital, possessing vast reserves of crude oil and naphtha, could supply these to NCC for the production of cost-effective ethylene, which LG Chem could then use to produce various specialty products, it could establish a win-win business structure. Kuwait Petroleum Corporation (KPC) and others have shown interest in LG Chem’s petrochemical division, according to reports.