Restructuring outline in overcapacity sectors in Korea such as steel, shipbuilding and petrochemical industries is in its final stage, and the government is expected to announce the guideline and support package later this month.

The government in April expressed will to restructure overcapacity industrial sites and had concerned companies look over the outline drawn up by consultants like Boston Consulting and McKinsey & Company since July.

The government will announce the final guideline based on coordination with companies later this month.

Under the outline, companies lacking competitiveness will be encouraged to integrate on their own, and the government will provide the necessary funding, tax, and other subsidy incentives to upgrade product portfolio.

Companies willing to realign their businesses will come under the benefits of the new Corporate Vitality Enhancement Act that went into effect from August 13.

According to industry sources, the interim report by outside consulting group suggested large-scale streamlining in three steel items - thick plates, steel pipes, and steel bars.

The report advised manufacturers of thick plates to cut back output by a third from current 12 million tons to 4 million tons amid poor sales from slump in shipbuilding industry. It proposed that more than three producing facilities to be shut down to meet the scale-down, causing uproar from the related industry.

The interim report also suggested that large steel pipe manufacturers should acquire facilities of mid-tier players while steelmakers should merge steel bar facilities according to three different regions - the Seoul metropolitan area, Gyeongsang Province, and Chungcheong and Jeolla provinces.

It however recommended that the three majors in the shipbuilding sector - Samsung Heavy Industries Co., Hyundai Heavy Industries Co., and Daewoo Shipbuilding and Marine Engineering Co. (DSME) - should stay intact as they have their own competitive edge.

Fine-tuning has been delayed to conflict of interests from concerning parties, source said.

Bain & Company that had been responsible for drawing up restructuring outline for the country’s petrochemical industry is known to have suggested streamlining in four items -terephthalic acid (TPA), polyvinyl chloride (PVC), polystyrene (PS), and some butadiene rubber (BR) and styrene butadiene rubber (SBR).

By Ko Jae-man

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