South Korea approves first petrochemical restructuring deal as supply glut weighs
South Korea has approved its first petrochemical industry restructuring project, offering a support package worth over 2 trillion won ($1.39 billion). The deal involves HD Hyundai Oilbank, Lotte Chemical, and their joint venture HD Hyundai Chemical, merging operations at Daesan. Lotte Chemical's Daesan naphtha cracking centre will halt operations for three years to address oversupply. This initiative aims to help companies weather a prolonged sector downturn, with the government planning further restructuring efforts.
South Korea's industry ministry has announced the approval of the country's inaugural petrochemical industry restructuring project, providing a comprehensive support package exceeding 2 trillion won ($1.39 billion). This significant move targets a prolonged sector downturn exacerbated by a global supply glut. The approved plan focuses on HD Hyundai Oilbank, Lotte Chemical, and their joint venture, HD Hyundai Chemical, by merging their operations at the Daesan industrial complex.Specifically, Lotte Chemical's Daesan unit will be spun off and integrated into HD Hyundai Chemical, creating a unified entity. Both HD Hyundai Oilbank and Lotte Chemical are committed to injecting 600 billion won each, totaling 1.2 trillion won, into the joint venture, adjusting the equity stake to an even 50-50 split. A crucial component of this restructuring is the three-year halt of operations at Lotte Chemical's Daesan naphtha cracking centre, which has an annual capacity of 1.1 million metric tons. This measure is intended to directly alleviate industry-wide oversupply, a major factor contributing to the sector's difficulties.The government's substantial support package includes up to 2 trillion won in financial assistance from creditor banks, significant tax breaks, streamlined regulatory approvals, and reduced utility costs estimated at 115 billion won, alongside 26 billion won in research and development funding. This comprehensive aid package underscores the government's commitment to revitalizing the vital petrochemical sector. The ministry also indicated its intention to pursue additional restructuring projects across other petrochemical complexes in the country, signaling a broader strategic effort to enhance the industry's competitiveness and resilience.
