The 1.8 Million-Ton "Shahin" Wave Approaches... Ulsan NCCs Scramble for Survival Strategies

The 'Shahin Project' by S-Oil, scheduled to begin operations in the first half of 2026, is heightening tensions within the Ulsan petrochemical complex. If 1.8 million tons of ethylene are released into the market annually, the profitability of Ulsan's naphtha cracking centers (NCCs) could be fundamentally shaken. SK Geocentric and Daehan Chemical, which operate NCCs in Ulsan, now face a critical decision: whether to continue vertical integration even if it means accepting some losses, or to procure ethylene from external sources at lower prices.

According to industry sources and Ulsan City officials on September 1, Daehan Chemical completed the construction of three naphtha storage tanks near the coast by its Onsan Plant in June. Until now, the company had sourced all its naphtha via pipeline from S-Oil, located just across the street. However, after the Shahin Project begins operations, S-Oil is expected to use the naphtha internally, reducing this supply chain. As a result, Daehan Chemical will inevitably have to rely more on external imports. This shift will increase logistics and procurement costs for raw materials, putting the company at risk of losing price competitiveness. A representative from Daehan Chemical stated, "The supply chain will not be completely severed," but added, "Compared to the just-in-time (JIT) supply method, costs may increase somewhat."

A signboard is placed at the entrance of Daehan Chemical Onsan Plant located in Onsan-eup, Ulju-gun, Ulsan. Directly opposite the entrance of Daehan Chemical, a large-scale petrochemical integrated production (COTC) facility construction is underway, in which S-Oil has invested 9 trillion won. Ulsan - Photo by Oh Jieun

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The problem is that pressure is coming simultaneously from both raw materials and products. Daehan Chemical faces increased cost burdens due to the reduction in naphtha sources, while SK Geocentric is concerned about a drop in product prices due to S-Oil's large-scale ethylene supply. SK Geocentric is currently operating its second NCC plant, with a capacity of 660,000 tons, at full capacity. However, in 2020, the company halted operations at its first plant (200,000 tons) due to deteriorating market conditions, reducing its production capacity by over 20% at that time. An SK Geocentric representative commented, "If an additional 1.8 million tons are supplied, there could be a significant price gap."

The Shahin Project is reportedly nearing 80% completion. This project involves S-Oil investing 9.258 trillion won to build petrochemical production facilities in the Onsan National Industrial Complex in Ulsan. It aims to expand the production capacity of basic olefins, including 1.8 million tons of ethylene and 770,000 tons of propylene, by introducing state-of-the-art technology that converts crude oil directly into petrochemical feedstocks. Operations are scheduled to begin in the first half of 2026. S-Oil has already signed supply contracts with companies such as Hyosung Chemical, which is engaged in propylene-based businesses. An S-Oil official stated, "This is a project that we are fully committed to," and added, "Rather than taking someone else's share, it is simply fair competition in the market."

On the 28th of last month, the Shahin Project, a large-scale petrochemical integrated production (COTC) facility construction invested 9 trillion won by S-Oil, is underway at the S-Oil Onsan Plant in Onsan-eup, Ulju-gun, Ulsan. Ulsan ? Photo by Oh Jieun

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Park Jongpil, head of the Chemical Materials Industry Team at Ulsan City Hall, explained, "Ulsan has a multi-layered ecosystem that extends from refining and naphtha to basic olefins, intermediate materials, and finished products." He added, "Not only large corporations but also dozens of small and medium-sized enterprises are positioned downstream, so a blow to one company can have a ripple effect throughout the chain." Ulsan City Hall plans to persuade the government to designate Nam-gu, Ulsan, as a "Preemptive Industrial Crisis Response Area," which would allow the region to receive tax benefits and other forms of support to aid in the transition of its industrial structure.

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