GS Caltex and Hyundai Oilbank will start operating their olefin facilities in the second half of 2021, signaling a big change in the petrochemical industry.

GS Caltex plans to start commercial operations of its olefin production facility Mixed Feed Cracker (MFC) next month, while Hyundai Oilbank will complete the construction of a heavy feed petrochemical complex (HPC) in August. Hyundai Oilbank has set up Hyundai Chemical in partnership with Lotte Chemical to build the HPC. GS Caltex invested a total of 2.7 trillion won in the MFC, while Hyundai Oilbank and Lotte Chemical jointly invested 3 trillion won in the HPC.

GS Caltex's MFC and Hyundai Chemical's HPC are a type of naphtha cracking center (NCC) that produces basic petrochemical products such as ethylene. The new facilities have price competitiveness compared with current NCCs because they allow an immediate injection of by-products from refining crude oil into petrochemical facilities and use various oils cheaper than naphtha as raw materials.

GS Caltex and Hyundai Chemical plan to produce 700,000 tons and 850,000 tons of ethylene per year, respectively, with their new facilities. In other words, 1.55 million tons of cheap ethylene will be released to the market starting from the second half of 2021.

Initially, some market experts pointed out that ethylene oversupply may occur. However, oil refiners and chemical companies say these concerns are overblown. This is because expectations for an economic recovery are on the uptick due to the expansion of Covid-19 vaccinations, which is expected to strengthen demand for chemical products. In particular, industry watchers predict that demand for products that have shown strong sales due to the Covid-19 pandemic will continue to be strong, and that demand for chemical products will swell thanks to an economic recovery.

As a result, chemical companies are shifting their business weight to specialty materials and eco-friendly materials with limited application areas but high added value. Korea’s leading NCC operators such as LG Chem, Lotte Chemical, and Hanwha Solutions are already showing more interest in specialty materials.