South Korea’s SK Group is cutting ties with one of its highest-profile China ventures, moving to sell its entire 35% stake in Sinopec-SK Petrochemical, a dramatic retreat from commodity chemicals as global oversupply crushes margins.
The sale, led by SK Geo Centric Co., a subsidiary of SK Innovation Co., is now in talks with China Petroleum & Chemical Corp. (Sinopec) and several other Chinese bidders, according to people familiar with the matter. Sources say the transaction is expected to fetch about its book value of 819.3 billion won (roughly $594 million).
Launched in 2013 with a joint investment of 3.3 trillion won, the Wuhan-based facility was once a showcase of SK’s “China Insider” strategy. At its peak, the plant churned out 3.2 million tons of basic chemicals annually, including 1.1 million tons of ethylene, and generated about 10 trillion won in yearly sales.
For nearly a decade it was a rare overseas success, delivering a cumulative operating profit of almost 2 trillion won by capitalizing on tight ethylene supplies. But since 2021, fortunes have reversed: the plant has racked up more than 1 trillion won in losses as China’s ethylene output nearly doubled to 60 million tons between 2020 and 2023, creating a glut and eroding prices.
“The restructuring of SK’s petrochemicals business is no longer confined to Korea. It is spreading to its overseas assets as well,” an industry executive said, noting that SK has made clear it will pare back operations lacking a clear future.
The move reflects the conglomerate’s sharp pivot to its so-called “ABC strategy,” focusing on artificial intelligence, batteries, and chips. SK has already shuttered or sold commodity chemical assets at home and abroad, including one of its two naphtha-cracking lines in Ulsan, and is seeking buyers for other overseas units acquired from Dow Chemical and France’s Arkema.
Korea’s petrochemical sector, a major importer of naphtha, has been battered by Beijing’s aggressive capacity expansion, with Chinese plants producing generic chemicals at lower costs and squeezing Korean profits. Analysts widely expect Sinopec, the world’s largest refiner and a major ethylene producer, to be the ultimate buyer. Full ownership would streamline management and mesh the Wuhan plant with Sinopec’s massive refining-to-chemicals network, while aligning with Beijing’s tighter controls over foreign stakes in strategic industries.
SK plans to channel proceeds from the divestment into its future growth bets. The group has pledged 8.2 trillion won in AI and semiconductor investments by 2030, including a large AI data center in Ulsan developed with Amazon Web Services. SK Hynix is ramping up advanced packaging for AI chips, while SK Innovation is working on energy storage and cooling systems tailored to data infrastructure.
“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.”
