Korean chemical companies are restructuring their basic chemicals divisions amid a challenging market environment. By the end of the year, they plan to streamline these operations and lower the ranks of executives overseeing them. The basic chemicals sector, which includes products like ethylene, has struggled to compete with China's increasing self-sufficiency, driving companies to pivot toward advanced materials, as reported by BusinessKorea.

Lotte Chemical has responded by appointing Lee Young-jun, former CEO of its advanced materials business, to lead both the chemical division and the basic materials business. This marks the first time Lotte Chemical has not designated a separate CEO for basic chemicals, consolidating leadership under the chemical division head. Similarly, LG Chem, another leading petrochemical company, named Executive Director Kim Sang-min to replace Vice President No Guk-rae as head of the petrochemical division. This effectively demotes the position by one level, a rare move for LG Chem, which traditionally appoints vice presidents to oversee key divisions like petrochemicals and advanced materials.

The leadership changes reflect a broader strategy to reduce dependence on basic chemicals and expand into advanced materials. Rather than waiting for a recovery in the basic chemicals market, companies are downsizing and reallocating resources to focus on higher-value products. Lotte Chemical, for instance, aims to reduce basic chemicals’ share of sales from the current 60% to less than 30% by 2030, while growing its advanced materials, fine chemicals, and hydrogen energy segments.

Historically, domestic firms like LG Chem and Lotte Chemical have relied on exporting basic chemical products, often referred to as the "rice of chemistry," to markets such as China. However, China’s rapid expansion of self-sufficient chemical production has significantly disrupted this export model. The oversupply in China has sharply deteriorated business conditions for the sector, forcing Korean companies to rethink their strategies.

In response, firms are actively cutting costs and reallocating resources. On December 2, Lotte Chemical halted the production of ethylene glycol at its Yeosu plant, while LG Chem stopped alcohol production at its Naju facility, even holding employee reassignment briefings. BusinessKorea reported that China's self-sufficiency, combined with low-cost competition, has blocked export opportunities, leaving domestic companies with no viable alternative markets. As losses mount, they are accelerating their portfolio shifts to more profitable and sustainable ventures.

This restructuring marks a significant transition as Korean chemical companies adapt to global market changes and strengthen their focus on advanced and sustainable materials for future growth.