The Korean government on Wednesday unveiled 2.1 trillion won ($1.46 billion) in financial support for the country’s first petrochemical restructuring, backing an overhaul of the Daesan complex between Lotte Chemical Corp. and HD Hyundai Chemical to accelerate broader industry self-rescue efforts.
The Ministry of Trade, Industry and Resources announced the package at a ministerial meeting on strengthening industrial competitiveness, alongside policy measures tied to the project.
“The government and its creditor banks will stand firmly behind the first Daesan project to ensure this preemptive restructuring proceeds without disruption,” Deputy Prime Minister for the Economy Koo Yun-cheol said.
Regulators approved the restructuring plan earlier in the week, marking the first authorization since Seoul unveiled a sector-wide roadmap in August calling for voluntary consolidation across an industry grappling with oversupply and weak profitability.
Under the plan, Lotte Chemical will spin off its plant at the Daesan petrochemical complex in Seosan, South Chungcheong Province, and merge it with HD Hyundai Chemical, a joint venture between Lotte Chemical and HD Hyundai Oilbank. Lotte Chemical and HD Hyundai Oilbank will each inject 600 billion won into the new entity, taking equal stakes.
Over the next three years, operations at Lotte’s naphtha cracking center will be halted, and downstream facilities at both sites will be scaled back. The combined company aims to pivot toward higher-margin products such as high-elasticity plastics and battery materials, as well as eco-friendly output using ethane and bionaphtha.
The new entity is expected to be established by September, with capacity reductions set to begin within the year.
Up to 2 trillion won of the package will be provided as financial support, including fresh funding and the conversion of existing loans into perpetual bonds. The remainder consists of tax incentives and regulatory relief.
Authorities will also grant repayment deferrals on about 7.9 trillion won of debt covered under the restructuring agreement through 2028, while maintaining existing lending terms.
Detailed financing measures will be finalized in consultation with policy lenders and other creditor institutions.
The Daesan approval is expected to accelerate restructuring efforts at other complexes. In Yeosu, South Jeolla Province, Yeochun NCC — a joint venture between Hanwha Solutions and DL Chemical — is preparing a proposal, while LG Chem and GS Caltex are discussing a potential joint venture. In Ulsan, SK Geo Centric, Korea Petrochemical Ind. Co. and S-Oil are engaged in related talks.
jwc@heraldcorp.com
