South Korean petrochemical producer Yeochun NCC Co. (YNCC) faces a default risk as its owners clash over fresh capital support. The joint venture is struggling with sustained losses and a weakened financial position due to a prolonged industry slowdown. Without urgent funding through bond sales or loans, the company could run out of liquidity within weeks. Industry sources warn that a shortfall of about 310 billion won could lead to a payment failure.
YNCC is a 50:50 venture between Hanwha Group and DL Group, both major South Korean conglomerates. The petrochemical producer has suffered deep losses from fierce competition with Chinese producers, oversupply, and reduced demand. Hanwha Solutions has offered to inject 150 billion won into YNCC, but DL Group refuses to provide matching funds. This disagreement has stalled rescue efforts and increased the default risk for the company.
DL Group maintains that YNCC must improve its earnings and financial structure before receiving any new capital. Talks between Hanwha and DL executives have repeatedly failed, with DL Chairman Lee Hae-wook insisting on a debt workout instead of funding. Hanwha favors a gradual production cut alongside new funding to stabilize operations. However, DL believes the company has no sustainable path forward without structural change.
The petrochemical producer has reported heavy losses for several years. It lost 61.8 billion won in the first quarter after posting a combined 823.9 billion won loss in the prior three years. Its debt-to-equity ratio now exceeds 280%, reflecting the strain from declining margins. Once one of Asia’s largest naphtha buyers, YNCC has seen profitability eroded by low-cost Chinese petrochemical exports.
DL Group’s reluctance to support YNCC is partly due to its own challenges in petrochemicals and construction. Hanwha cannot proceed with its planned capital injection without DL’s board approval. Without joint shareholder support, YNCC faces limited options, as debt workouts and court-led rehabilitation require cooperation from both owners. DL has rejected proposals for partial debt repayment and an ownership exit.
The dispute comes as the South Korean government seeks to restructure the struggling petrochemical sector. Authorities are considering reducing YNCC’s output and integrating it with Lotte Chemical’s facilities in Yeosu. The combined operation could leverage scale to withstand market pressures. Other companies, such as SK Geo Centric and Korea Petrochemical Ind., are also exploring mergers and production cuts in different regions.
With four naphtha crackers producing 2.3 million tons of ethylene annually, YNCC remains a major player despite its troubles. However, without resolution between Hanwha and DL, the company risks becoming the first large-scale casualty of the current petrochemical downturn. Industry observers warn that the standoff may delay broader restructuring efforts across the sector.
