 |
Lotte Chemical’s Daesan Plant. (Photo courtesy of Lotte Chemical) |
[Alpha Biz= Kim Jisun] South Korea has approved its first large-scale petrochemical restructuring project as the industry struggles with chronic oversupply driven by low-priced Chinese imports.
The Ministry of Trade, Industry and Energy (MOTIE) said it has endorsed a restructuring plan submitted by HD Hyundai Oilbank and Lotte Chemical, unveiling a support package worth KRW 2.1 trillion.
Under the plan, Lotte Chemical will spin off its Daesan petrochemical complex and merge it with HD Hyundai Chemical, a joint venture between the two firms. Lotte Chemical will suspend at least 1.1 million tons of naphtha cracking center (NCC) capacity for a minimum of three years to curb ethylene supply, with additional shutdowns possible for overlapping processes.
The companies plan to shift away from commodity products toward higher value-added materials, investing KRW 580 billion in new growth areas.
At the core of government support is KRW 2 trillion in financial assistance. Creditors will provide KRW 1 trillion in new funding and convert another KRW 1 trillion in existing loans into perpetual bonds, easing balance-sheet pressure. Debt repayment totaling KRW 7.9 trillion will also be deferred for at least three years.
The package includes electricity cost reductions through designation of the Daesan complex as a “distributed energy special zone,” as well as tariff exemptions on imported feedstocks and expanded LNG direct imports. Employment retention subsidies will also be offered despite facility shutdowns.
The government expects the restructuring to lift facility utilization at HD Hyundai Chemical to near full capacity and enable a return to profitability by 2028.
Attention is now shifting to whether similar restructuring efforts can follow in petrochemical hubs such as Yeosu and Ulsan, where companies have yet to agree on shutdown plans.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
