Hanwha Urges DL to Officially Confirm Yeocheon NCC Funding: "Market Uncertainty Must Be Resolved"

National Tax Service Taxation and Raw Material Pricing Dispute
Prolonged Negotiations Due to Differences on Contract Method and Price Standards
Hanwha: "Co-major Shareholders Must Fulfill Their Responsibilities... Default Is Not an Option"

Hanwha Solutions has called on DL Chemical, its co-major shareholder, to promptly make an official announcement regarding financial support for Yeocheon NCC. Hanwha refuted claims that DL is seeking to set ethylene supply price standards in a way that favors Hanwha during price negotiations, stating that these allegations are untrue and emphasizing the need to resolve market uncertainty as soon as possible.

On the 13th, Hanwha released a statement titled "Position on Yeocheon NCC Raw Material Supply Contract," stating, "DL should express a genuine intention to provide practical support, rather than focusing on public opinion." Hanwha added, "DL's ambiguous stance is prolonging market confusion and increasing anxiety among Yeocheon NCC employees and partner companies," and urged DL to make a prompt decision regarding financial support. On the 11th, the DL Group resolved to conduct a capital increase of 200 billion won for DL Chemical and for DL Co., Ltd. to purchase 177.8 billion won worth of DL Chemical shares. However, it has not clarified whether the entire amount will be injected into Yeocheon NCC.

A member of the Yeocheon NCC branch of the National Chemical Fiber Food Industry Labor Union is holding a banner that reads "We deeply appreciate Hanwha Group's trust and support for Yeocheon NCC" in front of the Hanwha Building in Jung-gu, Seoul, on the 12th. Photo by Yonhap News

The two sides are also experiencing conflict during renegotiations over the raw material supply contract, which expired at the end of last year. Hanwha stated, "Objective and fair price calculation in line with market conditions is the principle," and criticized DL's insistence on maintaining the price level from the 2006 boom period as unreasonable. Hanwha particularly emphasized that, despite purchasing more than twice as much ethylene as DL, it is being charged the same price, based on the position that identical items should be traded at the same price.

The calculation of the price for C4R1, a raw material for synthetic rubber, is also a point of contention. While DL claims that it is "an item without a market price," Hanwha countered, "Whether there are market transactions and whether a market price can be calculated are different concepts," and stated, "The claim that a market price cannot be determined is not true." Hanwha also reported that, in a recent tax audit, the National Tax Service imposed tax penalties amounting to over 100 billion won, with 96% of the amount arising from transactions with DL.

Hanwha stated, "Unfair transactions under tax law and the Fair Trade Act can be subject to taxation and sanctions, so it is essential to establish fair conditions that align with market prices," and added, "As joint major shareholders with a 50:50 equity structure, both parties must fulfill their responsibilities accordingly."

Yeocheon NCC is a key player with the third-largest ethylene production capacity in Korea (14% market share), established in 1999 with Hanwha Solutions and DL Chemical each holding a 50% stake. The company has been suffering from business difficulties, recording losses for three consecutive years and recently suspending operations at its third plant in Yeosu.

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