South Korea: HD Hyundai, Lotte Chemical Propose Major Petrochemical Restructuring
South Korea’s MOTIR announced that HD Hyundai Oilbank, HD Hyundai Chemical, and Lotte Chemical have submitted a joint restructuring plan. The proposal involves Lotte Chemical spinning off its Daesan petrochemical business to merge with HD Hyundai Chemical, aiming to rationalize capacity and integrate operations. This marks the first plan under the Corporate Vitalization Act, which offers incentives for approved restructurings, with more industry plans anticipated.
South Korea's Ministry of Trade, Industry and Resources (MOTIR) revealed that a significant restructuring plan has been jointly submitted by HD Hyundai Oilbank, HD Hyundai Chemical, and Lotte Chemical. This proposal centers on the consolidation of their operations within the Daesan industrial complex. Specifically, Lotte Chemical intends to spin off its Daesan petrochemical business, merging it into HD Hyundai Chemical. The primary objectives of this strategic move are to rationalize existing naphtha cracker and commodity petrochemical capacity, thereby establishing a more efficient, vertically integrated refining-to-petrochemicals operating structure. This marks the inaugural restructuring case submitted under the Corporate Vitalization Act, a framework established after the government announced an industry-wide overhaul roadmap in August. Companies securing approval under this act are poised to receive substantial incentives, including tax benefits and exceptions from commercial laws. MOTIR officials indicated that a comprehensive, customized support package – encompassing tax incentives, R&D assistance, cost-reduction measures, and regulatory easing – will be unveiled once the review process is completed. Furthermore, the ministry anticipates the submission of additional restructuring plans from other petrochemical companies before the close of the year, signaling a broader industry transformation effort. This initiative is seen as a crucial test of Seoul's commitment and capability to implement rapid capacity reductions necessary to stabilize industry finances and prevent wider defaults.
