Hyundai Oilbank's factory in Seosan, South Chungcheong Province / Courtesy of Hyundai Oilbank

Hyundai Oilbank cancels $250 million investment in new facilities

By Park Jae-hyuk

Fears of a perfect storm of a strong U.S. dollar, soaring inflation and rising interest rates have forced a growing number of major conglomerates here to postpone or retract their investment plans domestically and overseas, according to industry officials, Wednesday.

With the Korean currency weakening to a 13-year low of 1,440 won against the U.S. dollar during intraday trading on Wednesday and the benchmark KOSPI showing continuous downward movement, Korea's major companies are taking preemptive measures against an economic recession.

Hyundai Oilbank is the latest example of such companies.

The oil refiner's board of directors decided earlier this week to withdraw a 360 billion won ($250 million) investment to build facilities for crude distillation and vacuum distillation in its factory in Seosan, South Chungcheong Province.

The investment project had been in progress since 2019.

"Due to the skyrocketing raw material prices resulting from the unexpected COVID-19 pandemic and intensifying global inflation, it has been difficult to continue the construction," HD Hyundai, the parent firm of Hyundai Oilbank, said in a regulatory filing, Monday. "As rising costs have deteriorated the investment plan's profitability and it has been difficult to reasonably forecast the commodity market, Hyundai Oilbank's board members had no choice but to stop the investment."

In July, Hyundai Oilbank also quit its third attempt to go public, amid worsening investor sentiment this year, which led other big businesses, such as Hyundai Engineering, SK Shieldus and CJ Olive Young, to halt the procedures for their initial public offerings.

Earlier this month, Hanwha Solutions announced it would retract its plan to invest 160 billion won to build a dinitrotoluene (DNT) factory in Yeosu, South Jeolla Province, citing the rising costs caused by inflation and supply chain disruptions resulting from the Russia-Ukraine war and the COVID-19 pandemic.

The company had initially sought to build the factory with a capacity to produce 180,000 tons of DNT a year by the end of 2023.

SK hynix also decided in June to delay a 4.3 trillion won investment to enlarge its semiconductor factory in Cheongju, North Chungcheong Province.

LG Energy Solution is reconsidering a plan to invest $1.4 billion to build a cylindrical battery plant in Arizona, due to the soaring costs resulting from the recent deterioration of the global economy.