[Column] Only Sellers, No Buyers... Struggles in Restructuring Seokhwa and Battery Businesses

"Who would buy it now, maybe the Korea Development Bank..."

These are the complaints of petrochemical and battery industry insiders facing a recession due to recent oversupply from China and high interest rates. Groups like SK, LG, and Lotte, where petrochemical and battery businesses have become core operations, are attempting to sell some businesses to improve their financial structure, but while there are sellers, there are no buyers. The valuation of the businesses up for sale is expected to be in the trillions of won, and very few entities can invest such amounts. Selling as a short-term solution for business restructuring is disappearing from companies' options.

Negative outlooks on the battery and petrochemical industries have widened the gap between sellers and buyers. Due to the electric vehicle chasm (a temporary stagnation in a growth industry), the performance of battery material businesses is deteriorating. Although domestic battery material businesses are competitive, the nature of the order-based industry makes it difficult to flexibly respond to changes in the strategies and market positions of upstream customers. Our petrochemical industry is losing ground as China's petrochemical self-sufficiency rate rises, and now it faces competition even from companies in oil-producing countries that control raw materials.

Nevertheless, petrochemicals and batteries remain central pillars of our industry. They are among the highest export products following semiconductors and automobiles. Although shaken by China's strong threat to dominate the entire industrial supply chain, they are national key industries that cannot be abandoned. Weakening competitiveness in these intermediate goods industries could even shake downstream industries. The structure of our economy will become even weaker.

Therefore, these businesses cannot be sold at a 'bargain price' just because of urgency. This is especially true since the sales aim to inject funds and improve financial structures. We have witnessed countless companies that sold core businesses due to misjudging the duration and depth of the downturn, only to regret it bitterly when a boom returned shortly after. The recent intensification of US-China conflicts could also present opportunities for these two industries. As supply chains diversify, demand for our products outside China may increase. In the case of the battery business, forecasts that the market will rebound as front-end demand improves in a phase of interest rate cuts are gaining traction. Although it is not easy for the industry to find clues for business restructuring, the important thing is to protect the long-term competitiveness of our industry rather than rushing into premature business divestitures.

Jung Dong-hoon, Industrial IT Department Photo by Jung Dong-hoon

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