Korea’s YNCC shuts petrochem plant after explosion kills four

YEOSU, South Jeolla Province -- Yeochun NCC (YNCC) Co., South Korea’s major petrochemical producer, shut down one of its plants on Friday after an explosion at the complex killed four people and injured four.

The blast hit the No. 3 plant including a naphtha cracker with an annual ethylene capacity of 470,000 tons around 9:26 a.m. local time in Yeosu, a coastal city about 340 kilometers southwest of Seoul, according to the company and the government.

YNCC said the explosion took place during a test of the factory’s heat exchange system, although investigations by the authorities will determine the exact cause of the incident.

The labor ministry ordered the company to suspend the plant’s operations and launched a probe.

YNCC, a 50-50 joint venture founded in 1999 between Hanwha Solutions Corp. and DL Chemical Co., formerly known as Daelim Industrial Co., operates a petrochemical complex with a total capacity of 2.3 million tons of ethylene. The complex has two more crackers with each capacity of 900,000 tons and 915,000 tons.

Hanwha’s share price tumbled 6.8% to 32,800 won ($27.4) in Seoul’s stock market on Friday, far underperforming the 0.9% decline of the main Kospi. On the other hand, stocks of YNCC’s local rivals rallied with Lotte Chemical Corp. and Korea Petrochemical Ind. Co. up 2.8% and 6.1%, respectively.

ETHYLENE PRICES EXPECTED TO RISE

The incident is expected to raise prices of ethylene in Northeast Asia since the suspension is likely to cut supplies further, industry sources said.

“Prices will definitely rise from the next month, given reviving demand from China after the Lunar New Year holidays,” said an industry analyst in Singapore, Asia’s energy trading hub, adding that ethylene in Northeast Asia traded around $1,200 per ton this week, up from around $1,050 last week.

Regional petrochemical manufacturers already reduced operating rates as prices of naphtha, a feedstock for ethylene, surged, hurting their margins, sources said.

Prices of naphtha, a highly flammable liquid hydrocarbon mixture, are unlikely to decline on the blast, given stubbornly high crude prices, trading sources said. The No. 3 cracker is estimated to consume up to 1.6 million tons of naphtha a month, the analyst said.

Naphtha prices jumped to an eight-year peak with the Asian benchmark price at $842.6 a ton, the highest since September 2014, according to a market source.

“The market is too tight to expect lower prices, although naphtha in Asia may not rise further,” said a trader.

Write to Dong-Yull Rhim, Jeong Min Nam and Yonghee Kwak at exian@hankyung.com
Jongwoo Cheon edited this article.