Lotte Chemical Corp. and HD Hyundai Chemical Co. have agreed to integrate their naphtha cracking operations at South Korea’s Daesan industrial complex, marking the nation’s first significant voluntary restructuring response to Chinese overcapacity battering the sector.
The companies began negotiations earlier this year to merge their respective naphtha cracking center assets in Daesan, with a major accounting firm assessing asset values for a prospective joint venture. The proposed structure would see Lotte Chemical transfer its naphtha cracking facilities to HD Hyundai Chemical through in-kind contributions, while HD Hyundai Oilbank would adjust equity by contributing cash or other means.
The restructuring comes as Lotte Chemical bleeds cash. The company swung from an operating profit of ₩1.54 trillion ($1.05 billion) in 2021 to losses of ₩762.6 billion ($518 million) in 2022 and ₩894.1 billion ($607 million) in 2024, according to industry reports.
China’s annual ethylene production capacity surged from 1,950 tons in 2014 to 5,274 tons in 2024, more than doubling Korea’s 1,270-ton annual production. The overcapacity slashed ethylene prices by over $500 per ton over the past year.
South Korea’s 10 largest petrochemical companies agreed to restructure operations last month, including up to 25% cuts to naphtha-cracking capacity, as the government pressures the industry to consolidate or face collapse.
