Seoul Launches W2.1 Trillion Support for Petrochemical Restructuring
The Korean government has committed 2.1 trillion won ($1.46 billion) in financial aid to restructure the petrochemical industry, beginning with the Daesan complex. This initiative supports Lotte Chemical's merger of its Daesan plant with HD Hyundai Chemical. The goal is to pivot towards higher-margin, eco-friendly products, address oversupply, and improve profitability. The plan includes halting naphtha cracking, scaling back facilities, and deferring 7.9 trillion won in debt, setting a precedent for broader industry consolidation.
The Korean government has unveiled a 2.1 trillion won ($1.46 billion) financial support package to spearhead the country's first petrochemical industry restructuring, focusing initially on the Daesan complex. This strategic move, announced by the Ministry of Trade, Industry and Resources, aims to back the overhaul of operations between Lotte Chemical Corp. and HD Hyundai Chemical. Deputy Prime Minister Koo Yun-cheol affirmed strong governmental and creditor bank support to ensure a smooth, preemptive restructuring process. The core of the plan involves Lotte Chemical spinning off its plant at the Daesan complex and merging it with HD Hyundai Chemical, a joint venture of Lotte Chemical and HD Hyundai Oilbank. Both parent companies will inject 600 billion won each into the new entity, securing equal stakes. Over the next three years, Lotte's naphtha cracking center will cease operations, and downstream facilities will be scaled back. The newly formed company intends to pivot towards higher-margin products like high-elasticity plastics and battery materials, and adopt eco-friendly production methods using ethane and bionaphtha to enhance profitability. The package includes up to 2 trillion won in direct financial aid, such as fresh funding and conversion of existing loans into perpetual bonds, alongside tax incentives and regulatory relief. Authorities will also defer repayments on approximately 7.9 trillion won of debt until 2028. This Daesan project, expected to finalize by September with capacity reductions commencing this year, is anticipated to catalyze similar restructuring efforts across other major petrochemical complexes in Yeosu and Ulsan, involving key players like Yeochun NCC, LG Chem, GS Caltex, SK Geo Centric, Korea Petrochemical Ind. Co., and S-Oil, aiming for sector-wide consolidation to combat oversupply and improve financial stability.
