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HD Hyundai Oilbank and Lotte Chemical have formally submitted a restructuring plan to the Ministry of Trade, Industry and Energy (MOTIE), marking a significant step toward consolidating their naphtha cracking operations at the Daesan petrochemical complex.

The filing follows months of negotiations and would represent South Korea’s first large-scale, self-initiated restructuring in the domestic petrochemical sector. Under the proposal, Lotte Chemical will transfer its Daesan cracker and related assets into an HD Hyundai Chemical entity. Lotte will then inject cash to establish a new 50:50 joint venture, replacing the current 60:40 ownership split with HD Hyundai Oilbank.

According to local media, the plan entails shutting Lotte Chemical’s 1 million tons/year Daesan cracker, leaving HD Hyundai Chemical’s 850,000 tons/year unit as the sole operating cracker on site.

The companies said centralising production at Daesan will enhance operational stability and efficiency. Lotte Chemical added that any government support will be contingent on MOTIE’s review.

The move comes as domestic producers face mounting pressure to rationalise capacity amid persistent overcapacity, weak margins, and a prolonged global downturn. The government has urged petrochemical firms to accelerate restructuring, warning that the year-end deadline for plan submissions will not be extended, and that late filers will be ineligible for state assistance.

In August, ten major producers—including Lotte Chemical, LG Chem, Hanwha Solutions, SK Geo Centric, Korea Petrochemical, and S-Oil—agreed to cut up to 3.7 million tons/year of naphtha cracking capacity as part of a nationwide restructuring drive. Authorities have emphasised that timely consolidation in key hubs such as Yeosu and Daesan is critical for sector stability and long-term competitiveness, suggesting other companies may follow suit.

Producers in Yeosu—including LG Chem, Lotte Chemical, GS Caltex, and Hanwha Solutions—are also exploring restructuring options. Seosan, on the other hand, has been designated an industrial crisis zone due to ongoing economic pressures from weak petrochemical and steel markets.

Once MOTIE completes its review, approved plans will be eligible for tailored government support. The ministry is also drafting a broader roadmap to accelerate the shift toward higher-value specialty chemicals, including priority R&D funding for firms participating in restructuring initiatives.

Industry analysts view the Daesan plan as a potential test case for South Korea’s broader petrochemical overhaul. If successfully implemented, it could provide a model for further consolidation and capacity rationalisation across a sector struggling with structural oversupply and global competitiveness challenges.

Written by: Farid Muzaffar