GS Caltex MFC Operating Rate Falls to 75% After 2.7 Trillion Won Investment... When Will Returns Materialize?

Operating rate drops by 7 percentage points from 82% in Q1
Petrochemical division posts a loss in Q2
Industry-wide profitability deteriorates
Korea Ratings: "Realization of investment returns delayed"

The operating rate of GS Caltex’s Mixed Feed Cracker (MFC), which was established with an investment of approximately 2.7 trillion won, fell to 75% in the second quarter of this year. The petrochemical segment, after turning a profit in the first quarter, returned to a loss in the second quarter. As a result, it is being assessed that performance from this large-scale investment is materializing more slowly than expected.

According to industry sources on September 3, the operating rate of GS Caltex’s MFC for the second quarter stood at 75%, a decrease of 7 percentage points from 82% in the first quarter. The MFC is a facility capable of processing a variety of feedstocks such as naphtha, liquefied petroleum gas (LPG), and byproduct gases. GS Caltex completed the MFC in 2022 with an investment of around 2.7 trillion won to expand its non-refining business and strengthen cost competitiveness.

However, with the prolonged downturn in the petrochemical industry, returns on the investment have yet to materialize as hoped. The GS Caltex petrochemical division posted an operating loss of 146.2 billion won last year. In the first quarter of this year, it swung to an operating profit of 35 billion won, but in the second quarter, it again recorded an operating loss of 6.3 billion won.

Credit rating agencies are also closely monitoring the outcomes of the MFC investment. In its June 2026 credit report on GS Caltex, Korea Ratings·KR stated that “the full-fledged realization of investment returns from the MFC is being delayed.” The agency also noted that while supply of olefin products, particularly from China and the Middle East, has increased, demand recovery has lagged, resulting in margins remaining below breakeven for a prolonged period.

The broader slump in the petrochemical industry is casting a shadow over the entire sector. Due to oversupply from China and the global economic slowdown, the overall profitability of Korea’s petrochemical industry has deteriorated. Major refiners such as HD Hyundai Chemical and S-Oil have also recently reported losses in their petrochemical businesses, highlighting the widespread impact of the downturn.

However, whether the MFC that GS Caltex invested 2.7 trillion won in is delivering the expected effect of defending profitability under these circumstances is being questioned separately. GS Caltex had previously promoted the MFC’s diverse feedstock flexibility and reduced dependence on refining as key strengths at the time of investment.

GS Caltex maintains that the cause of the sluggish returns on the MFC investment lies in the broader downturn in the petrochemical industry, rather than issues with the individual facility itself. A company representative said, “Not only did large-scale capacity expansions take place in China, but the sluggish Chinese economy led to an increase in low-priced volumes. Consequently, export prices and margins for Korea’s petrochemical products have fallen. It is excessive to view this as an issue limited to the MFC.”

The company did not disclose specific figures regarding the current performance compared to the planned payback period or target profitability at the time of the MFC investment. However, the company did confirm that despite the worsening conditions in the petrochemical sector, it is not at a point where impairment losses on MFC-related assets are being considered.

GS Caltex is currently discussing the restructuring of its Yeosu petrochemical facilities with LG Chem. As oversupply from China is expected to continue for the foreseeable future, the direction of future facility restructuring and the recovery of MFC’s operating rate are seen as key factors in determining the returns on the 2.7 trillion won investment.

This content was produced with the assistance of AI translation services.