South Korea’s leading conglomerate SK Group is set to fully exit its bulk chemical business in China by selling its entire 35% stake in Sinopec-SK (Wuhan) Petrochemical Company, a joint venture with China’s state-owned energy giant Sinopec. The divestment marks SK’s strategic retreat from the commodity chemical sector amid industry-wide supply glut and shrinking profit margins across the global petrochemical market.
According to industry insiders disclosed on Tuesday, the divestment is led by SK Geo Centric Co., a subsidiary of SK Innovation Co. The firm has initiated negotiations with Sinopec — which holds a 65% controlling stake in the joint venture — and multiple Chinese bidders. The transaction is expected to be priced at approximately 819.3 billion South Korean won (equivalent to 594 million US dollars), based on the company’s book value.
Founded in 2013 with a total investment of 3.3 trillion won, the Sinopec-SK Wuhan petrochemical plant once served as a core symbol of SK Group’s China Insider localized development strategy. The high-capacity facility produces 3.2 million tons of general chemicals annually, including 1.1 million tons of ethylene, recording a peak annual sales volume of 10 trillion won and standing as a key overseas asset for SK’s chemical business.
For most of the past decade, the Sino-Korean joint venture was a successful overseas project for SK Group. Benefiting from the global supply shortage of ethylene — a fundamental raw material for the petrochemical industry — the joint venture accumulated nearly 2 trillion won in operating profits during its first eight years of operation.
However, the business landscape has undergone a fundamental reversal since 2021. Driven by a sharp surge in China’s domestic ethylene production capacity and stagnant market demand, the Wuhan plant has recorded total losses exceeding 1 trillion won. Statistics show China’s ethylene output nearly doubled between 2020 and 2023, reaching 60 million tons, leading to severe market oversupply and compressed profit margins for foreign chemical enterprises operating in China.
Industry executives pointed out that SK’s chemical business restructuring is no longer limited to South Korea but has expanded to global overseas assets. The group has made it clear that it will scale back businesses without sustainable growth prospects, hinting at further production cuts and adjustments at its Ulsan production base in South Korea.
The full exit from the Wuhan petrochemical joint venture highlights SK Group’s comprehensive shift to its coreABC growth strategy — focusing on Artificial Intelligence (AI), Batteries, and Chips businesses.
In recent years, SK has continuously streamlined its traditional bulk chemical business. The group has shut down one of its two naphtha cracking lines in Ulsan and is seeking buyers for the remaining production line. In August of this year, industry sources revealed that SK Geo Centric was in talks with global petrochemical enterprises to sell overseas subsidiaries previously acquired from Dow Chemical and Arkema, further consolidating its restructuring layout.
The strategic adjustment is part of a nationwide restructuring wave sweeping South Korea’s petrochemical sector. As one of the world’s largest naphtha importers, South Korea’s chemical industry has borne the brunt of China’s aggressive capacity expansion. Chinese petrochemical facilities produce general chemical products at far lower costs, putting unprecedented financial pressure on South Korean traditional chemical enterprises.
Industry analysts believe Sinopec is the most probable acquirer of SK’s 35% stake. As the world’s largest oil refiner, Sinopec processed 252 million tons of crude oil last year and boasts an annual ethylene production capacity of 13.5 million tons, with mature integrated refining and chemical industrial chains.
Full ownership of the Wuhan petrochemical plant will enable Sinopec to streamline decision-making processes and fully integrate the facility into its unified refining and chemical supply chain system. In addition, China’s intensified regulatory review of foreign equity in strategic industrial sectors has further supported Sinopec’s full acquisition of the joint venture.
Proceeds from the petrochemical asset divestment will be fully invested in SK Group’s high-growth strategic sectors. The group has pledged to invest 8.2 trillion won in AI and semiconductor industries by 2030, including the construction of a large-scale AI data center in Ulsan in cooperation with Amazon Web Services (AWS).
SK Hynix, one of the world’s top two memory chip manufacturers, is scaling up advanced packaging capabilities for AI chips. Meanwhile, SK Innovation is developing customized energy storage and cooling systems for digital data infrastructure, laying a solid foundation for the group’s industrial transformation.
Industry insiders close to the transaction stated that bulk chemicals have ended their role as a core growth driver for SK Group. The conglomerate’s new development chapter will focus on AI and semiconductor sectors, rather than traditional ethylene and commodity chemical businesses.
