Lotte Chemical Titan's factory in Malaysia / Courtesy of Lotte Chemical

A growing number of Korean petrochemical companies are halting investments and considering selling their unprofitable facilities to cope with the lingering industry downturn resulting mainly from the oversupply of Chinese products, according to industry officials, Tuesday.

LG Chem is reportedly negotiating with Kuwait Petroleum Corp. to split off its second naphtha cracking center in Yeosu, South Jeolla Province, and sell part of its stake in the facility to the Middle Eastern country's state-owned company.

This came after the Korean firm failed last year to find an eligible buyer of the factory who could afford at least 3 trillion won ($2.3 billion).

"We are considering various options to enhance the competitiveness and value of our petrochemical business, but nothing has been decided yet," the chemical unit of LG Group said in its regulatory filing.

Lotte Chemical is said to be trying to sell Lotte Chemical Titan, its manufacturing plant in Malaysia, which produces ethylene, polyethylene and polypropylene.

Petrochemical companies here and overseas, as well as major private equity firms, are mentioned as potential buyers of the Malaysian stock market-listed company, which is evaluated at 740 billion won. In 2010, Lotte Chemical acquired the factory from Malaysian firms for 1.5 trillion won.

Given that the Korean firm failed twice in its attempts to sell its Pakistani subsidiary, however, it remains uncertain whether it will succeed in selling the Malaysian subsidiary.

"We are considering various strategies regarding Lotte Chemical Titan, but nothing has been decided yet," the chemical unit of Lotte Group said in its regulatory filing.

Hyosung TNC, the world's leading spandex maker, recently scrapped its plan to produce butanediol, one of the key materials for spandex, citing the rapid increase in the supply of Chinese products.

Kumho Petrochemical confirmed it will unload its entire stake in one of the two remaining Chinese joint ventures, although the company cited environmental regulations as the reason, instead of its profitability. The company is also rumored to be selling its stake in the other joint venture, although it denied the rumor.

In 2021, the Korean firm sold its 50 percent stake in Nanjing Kumho GPRO Chemical to its Chinese partner, Jiangsu GPRO Group, to focus on more lucrative businesses.

Before the COVID-19 pandemic, China was the largest importer of Korean petrochemical products. The world's second-largest economy's reopening was therefore expected to allow LG Chem, Lotte Chemical and various other petrochemical firms here to enjoy a rebound in their profits.

However, Chinese companies have enhanced their production capacities over the past few years, becoming the main competitors of Korean firms in the markets for ethylene and propylene. In addition, weakening demand for petrochemical products amid the global economic slowdown has curbed an increase in their prices.

Securities analysts remained skeptical about a recovery in the petrochemical sector in the near future.

"Producers of rechargeable battery materials or downstream products, such as synthetic resins, will be the only survivors in the petrochemical market," NH Investment & Securities analyst Choi Young-kwang said.

Sung Dong-won, a researcher at the Export-Import Bank of Korea's Overseas Economic Research Institute, also advised Korean petrochemical firms to diversify their buyers and seek a transition to high value-added and eco-friendly products.