Factories Reduce Operations and Use Joint Annual Leave... Companies Face Harsh Year-End Cold Spell

Increase in Chinese Production and Industry Slump Cause Struggles
Factories Reduce Operations and Bring Forward Year-End Ceremonies
Some Companies Apply Joint Annual Leave

Domestic heavy and medium-sized enterprises, suffering from sluggish business conditions and restructuring pains, are reducing factory operations and moving up year-end closing ceremonies. As the operating rate drops due to sluggish demand in upstream industries, they are stopping work altogether and undertaking maintenance. Some companies have decided not to come to work for more than a week by applying joint annual leave.

According to industry sources on the 12th, LG Chem will hold its year-end closing ceremony on the 20th. Typically, the closing ceremony takes place on December 30-31, but this year it has been moved up by as much as ten days. After the ceremony, employees are encouraged to take voluntary leave until January next year. The production sites are also recommending leave to all except personnel necessary for factory operations.

LG Chem Daesan Plant NCC Overview. Photo by LG Chem

Doosan Group has designated the period from the 24th to the 31st as a joint annual leave period for one week, and Kolon Group's holding company will also use joint annual leave for a week starting from the 23rd. Taking only four days off excluding Christmas results in a nine-day holiday.

A Kolon official said, "In an unstable internal and external management environment, the purpose is for employees to refresh themselves over the year and to encourage them to work hard again next year." SK, Hanwha, and GS groups do not take breaks at the group level but encourage voluntary use of leave.

Chemical and material companies are moving up year-end holidays and closing ceremonies because their main products are losing out to Chinese-made goods and demand is sluggish. Due to the impact of high inflation, production costs are also rising, causing losses to accumulate the more products are produced. Ultimately, they have no choice but to reduce factory operations at year-end to adjust production and inventory.

Lotte Chemical, which is experiencing the worst crisis, has designated December 31 as Work-Life Balance Day and encourages the use of leave. Lotte Chemical has stopped production lines such as ethylene glycol (EG) and ethylene oxide derivatives (EOA) at its Yeosu Plant 2 starting this month. In the first half of the year, PET operations at the same plant were also suspended.

Lotte Chemical's naphtha cracker operating rate fell by 6 percentage points from 87.8% in the third quarter of last year to 81.8% in the third quarter of this year. LG Chem's petrochemical division also recorded an average operating rate of only 81.6% in the third quarter.

Battery material companies are also facing difficulties. Recently, with the sharp drop in graphite prices, the operating rate of POSCO Future M, a battery anode material manufacturer, is around 30%, about 10 percentage points lower than at the beginning of the year. Due to the electric vehicle chasm (a temporary demand slump), running the factory results in losses.

According to the Mineral Resources Service of the Korea Mining Industry Promotion Corporation, graphite prices are at a record low of $465 per ton. The price of graphite anode materials has also fallen sharply, with Chinese anode material companies drastically reducing prices to the high $2 per kilogram range. POSCO Future M's anode material plant operating rate has been declining annually from the 70% range in 2021 to the 60% range in 2022 and the 50% range in 2023.

An industry insider said, "Since the second half of the year, companies have responded by lowering operating rates, but heavy and medium-sized enterprises suffer greater losses if they stop equipment, so they have no choice but to induce annual leave consumption in other parts of the organization to improve operational efficiency."

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