SK Group is divesting its entire 35% stake in Sinopec-SK Petrochemical as South Korea’s largest conglomerate withdraws from the beleaguered commodity chemicals sector. The sale reflects broader industry turmoil caused by chronic oversupply and collapsing profit margins.
SK Geo Centric, a subsidiary of SK Innovation, has initiated discussions with China Petroleum & Chemical Corp and several Chinese bidders, according to sources familiar with the matter. The transaction is expected to be priced around the venture’s book value of 819.3 billion won ($594 million).
The Wuhan-based operation, established in 2013 with 3.3 trillion won ($2.25 billion) in combined investment, was once the centerpiece of SK’s “China Insider” strategy. The facility produces 3.2 million tons of chemicals annually, including 1.1 million tons of ethylene.
Initially profitable, the joint venture accumulated nearly 2 trillion won ($1.45 billion) in operating profits during its first eight years. However, the plant began hemorrhaging money in 2021, racking up more than 1 trillion won ($725 million) in losses as Chinese production capacity surged and domestic demand stagnated.
Ethylene output in China nearly doubled between 2020 and 2023 to reach 60 million tons. This capacity explosion has created structural oversupply across global petrochemicals markets, with an estimated 24% of global ethylene production capacity now at risk of closure.
Sinopec, which holds the remaining 65% stake, emerges as the most likely buyer. Full ownership would enable the state-controlled giant to streamline operations and integrate the facility into its supply chain.
The divestment marks a stark reversal for what was once hailed as a cross-border success story.
