Lotte, HD Hyundai near petrochemical restructuring deal

(Lotte Chemical)

South Korea’s petrochemical industry is nearing its first major restructuring outcome, as HD Hyundai Chemical and Lotte Chemical finalize plans to consolidate their operations at the Daesan Industrial Complex before the government’s year-end deadline.

According to industry sources on Sunday, the two companies are preparing a restructuring plan that merges their petrochemical facilities through asset transfers and are now discussing the timing and format of the official announcement. Both firms are expected to hold board meetings soon to approve the plan.

Under the proposal, the naphtha cracking centers (NCCs) at the Daesan plants of both companies would be transferred in kind to HD Hyundai Chemical, which would then establish a joint venture through a cash contribution, with equity ownership expected to be evenly shared between the two sides. Currently, HD Hyundai Oilbank holds a 60 percent stake in HD Hyundai Chemical, while Lotte Chemical owns 40 percent.

This marks the first confirmed restructuring case since 10 petrochemical firms signed a voluntary cooperation agreement for business realignment on August 20.

However, several hurdles remain — including potential issues under Korea’s Fair Trade Act and taxation matters. The act prohibits mergers that could create a dominant market player, but the government is reportedly considering temporary exemptions, given the urgency of restructuring in the petrochemical sector.

Similar restructuring discussions are also underway elsewhere: in Ulsan, Korea Petrochemical Ind. Co., SK geocentric, and S-Oil are jointly reviewing options with external consultants. In Yeosu, LG Chem has proposed selling its local NCC plant to GS Caltex to form a new joint venture, but talks have stalled. Meanwhile, the integration of Lotte Chemical and Yeochun NCC hinges on resolving disputes among Yeochun NCC’s shareholders, Hanwha Solutions and DL Chemical.