SK Group is selling its entire 35% stake in Sinopec-SK Petrochemical, a joint venture with Sinopec in Wuhan, China, as oversupply and falling margins in commodity chemicals drive the South Korean conglomerate to exit the sector. The move signals a strategic shift away from petrochemicals toward high-growth areas like AI and chips, with implications for global chemical supply chains and Chinese sourcing dynamics.
Deal details and background
SK Geo Centric Co., a subsidiary of SK Innovation Co., has initiated talks with Sinopec, which holds the remaining 65% stake, and several other Chinese bidders, according to sources on Tuesday. The Wuhan-based plant, established in 2013 with a combined investment of 3.3 trillion won, was once a symbol of SK's "China Insider" strategy and can produce 3.2 million tons of general-purpose chemicals annually, including 1.1 million tons of ethylene.
Financial performance and market pressures
In its first eight years, the joint venture posted a cumulative operating profit of nearly 2 trillion won, benefiting from supply shortages in ethylene. However, since 2021, the plant has accumulated over 1 trillion won in losses, squeezed by a surge in Chinese production capacity and stagnant domestic demand. Ethylene output in China nearly doubled between 2020 and 2023 to reach 60 million tons.
Strategic implications for SK Group
"The restructuring of SK's petrochemicals business is no longer confined to Korea. It is spreading to its overseas assets as well," said an industry executive. "The group has made clear it will reduce businesses without a clear future, so further retrenchment in Ulsan cannot be ruled out." SK has already closed or sold parts of its commodity chemical operations at home and abroad, including shutting one of its two naphtha cracking lines in Ulsan and seeking a buyer for the other.
China sourcing context
Analysts said Sinopec, the world's largest refiner with 252 million tons of crude processed last year and 13.5 million tons a year of ethylene production capacity, is the most likely buyer. Full ownership of the Wuhan plant would enable the state-owned giant to streamline decision-making and integrate the facility into its comprehensive refining-to-chemicals supply chain. Korean companies have been among the most severely impacted by Beijing's aggressive capacity expansion, with Chinese plants producing generic products at significantly lower costs.
What buyers should watch
"The era of commodity chemicals as a growth driver seems to be over for SK," said a person close to the deal. "Its next chapter will be written in AI and chips, not ethylene." Overseas buyers should monitor how Sinopec's potential full ownership of the Wuhan plant affects pricing and supply stability for ethylene and other commodity chemicals in the region. The sale also signals broader restructuring in South Korea's petrochemical sector, which may lead to reduced exports and tighter supply for certain derivatives.
Source: Read the original report | Published: September 16, 2025