Built Battery Plant in US, Received 1 Trillion Won Benefits... 2023 Mid-to-Heavy Industry Transformation Turmoil

Major Issues in the Heavy and Chemical Industry

Our company built a factory in the United States, and the US government gave us 1 trillion won in tax benefits. An unprecedented event occurred this year in the battery industry. We reviewed the changes that took place this year in the heavy and chemical industries undergoing rapid industrial transformation.

◆Battery leaders replaced amid slowing electric vehicle demand... Era of self-reliance= The once-booming electric vehicle market has entered a demand slump, causing significant challenges for domestic battery companies. Two of the three major battery firms replaced their leaders to find breakthroughs. LG Energy Solution saw Vice Chairman Kwon Young-soo retire, and Kim Dong-myeong, born in 1969 and head of the automotive battery division (president), was appointed as the new CEO. SK On promoted CEO Ji Dong-seop to the SUPEX Council and appointed former SK Hynix CEO Lee Seok-hee as the new CEO. President Kim must maintain the top position among domestic battery companies while achieving qualitative growth. CEO Lee, an expert in manufacturing, must lead the company out of deficits and stabilize yield rates. Samsung SDI President Choi Yoon-ho is also tasked with commercializing solid-state batteries.

◆US IRA detailed guidelines finalized... Increased concerns for K-battery= The US government finalized detailed guidelines for the Inflation Reduction Act (IRA) early this year. While management and investment uncertainties have been resolved, concerns for the domestic battery industry have increased. The US government recently designated joint ventures with Chinese ownership exceeding 25% as 'Foreign Entities of Concern (FEOC)' and announced they will be excluded from IRA electric vehicle subsidies. Korean companies that have partnered with Chinese firms are now under pressure. With the advanced manufacturing production credit (AMPC) for the three battery companies expected to exceed 1 trillion won, pressure from US automakers to 'share IRA subsidies' is also a burden.

◆Revived shipbuilding... Turned profitable and entered a boom period= Shipbuilding has reclaimed its position as a representative Korean industry. Market conditions have recovered, and operating profits have greatly improved. Strengthened environmental regulations have driven the prices of LNG (liquefied natural gas) vessels, our mainstay, to soar. Samsung Heavy Industries ended a 5-year and 6-month loss streak and returned to profitability on a quarterly basis. Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering), under Hanwha Group, also turned profitable after 11 quarters. HD Hyundai Heavy Industries aims for 300 billion won in operating profit this year.

◆No one to build ships... Securing foreign labor is critical= Although the shipbuilding industry is experiencing a tailwind, securing manpower is urgent. Due to a prolonged downturn, more than half of the workforce that built ships has left over the past eight years. The government has secured over 14,300 production workers, including 12,000 foreign workers, but it is still insufficient.

The 174,000㎥ class LNG carrier built by HD Hyundai Heavy Industries and delivered in 2020 [Photo by HD Hyundai Heavy Industries]

◆Greenhouse gas reduction regulations shake up petrochemical industry= This year, petrochemical companies faced their gloomiest period since establishment. They confronted the double whammy of worsening market conditions and environmental regulations. Competition with China led to continued weak demand and oversupply. Amid a climate where running factories results in losses, LG Chem is considering selling its Yeosu NCC plant. Achieving carbon neutrality remains a burden. Petrochemical companies are reducing general petroleum products and venturing into eco-friendly businesses such as sustainable materials and recycling waste plastics.

◆Steel industry CEOs replaced... Facing the CBAM blade= The introduction of the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM) has shaken the domestic steel industry. From October, carbon emissions must be mandatorily reported when exporting steel products to the EU. Companies must either reduce carbon emissions or give up exports. The CEOs of the three major steel companies have also changed. With Chairman Choi Jung-woo's term ending, POSCO Group will hold a board meeting this month to discuss the next chairman appointment. Hyundai Steel appointed Seo Kang-hyun, head of Hyundai Motor's Planning and Finance Division, as CEO. Dongkuk Steel's Chairman Jang Se-ju returned to frontline management after eight years.

[Image source=Yonhap News]

◆Petroleum Business Act amendment passed... Removing obstacles to carbon neutrality= Greenhouse gas reduction regulations also impacted the refining industry. The 'Petroleum and Petroleum Alternative Fuel Business Act,' which prohibited the use of pyrolysis oil made from recycled waste plastics in petroleum refining processes, had hindered refiners' carbon neutrality efforts. Recently, the National Assembly pushed for amendments, clearing the blockage. The refining industry expects that lifting raw material restrictions will open the way to use pyrolysis oil from waste plastics and bio-jet fuel.

This content was produced with the assistance of AI translation services.