Calls for restructuring in steel, petrochemicals

The government is calling for restructuring in the nation’s steel and petrochemical industries, as issues of oversupply in the global market continue to put pressure on Korean companies.

The country’s minister of trade, industry and energy, Joo Hyung-hwan, met with heads and representatives of key petrochemical companies including Lotte Chem and LG Chem on Wednesday, where he requested they find ways to restructure or reorganize their business lines in order to be more competitive in the global market.

Joo had another meeting with government officials later in the day to discuss ways to help local steel and petrochemical companies.

“Currently, a number of companies are going through restructuring, but I think restructuring a company that has financial problems isn’t enough and believe the same measures should be done by the industry as a whole instead,” Joo said.

“Steelmakers are going through a hard time due to oversupply in the world and newly developed alternative materials, and petrochemical companies have to be prepared in advance as Korea’s leading export country, China, is decreasing its import of Korean petrochemical products.”

According to the ministry, the global steel industry is facing oversupply numbering more than 750 tons of steel, and the problem is likely to grow. The government said Japanese steelmakers are already finishing up their restructuring, and companies in the European Union and China are taking similar steps as well.

Joo has already called on Korean steelmakers to restructure and change their business lines to focus on developing eco-friendly products in order to be more competitive in the global market. He promised the government would provide various benefits to those who carry out restructuring measures as well as help them find new export markets abroad.

The country’s petrochemical companies have been performing quite well recently, but the government said it was mainly due to low global crude prices. It cautioned companies to be prepared when oil prices go up again and as Chinese counterparts providing similar products at relatively lower prices are becoming more competitive.

According to the ministry, four kinds of products among the 33 major petrochemical products are facing oversupply issues.

“Even though the four products, including synthetic rubber and polyvinyl chloride, only account for 12 percent of the total petrochemical market in Korea, manufacturers of such products tend to be large-size major companies [which might cause a bigger problem when they are faced with financial issues],” Joo said.

He added that such manufacturers need to find new alternative products to replace such goods.

The government will announce specific plans for restructuring in the two industries on Friday.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]