Lotte Chemical Corp. and HD Hyundai Co. will pump ₩800 billion ($545 million) into their joint petrochemical operations in Daesan, the largest capital commitment yet under South Korea’s government-driven industry consolidation effort.
The investment comes as both companies prepare to merge their naphtha cracking facilities at the Daesan complex in South Chungcheong Province. Lotte Chemical will spin off its 1.1-million-ton-per-year unit and fold it into HD Hyundai Chemical, which operates an 850,000-ton facility at the same site. Following the merger, the two parent companies will each hold 50% of the combined entity, restructuring ownership from the current 60-40 split favoring HD Hyundai Oilbank.
The deal represents the first concrete outcome of Seoul’s August directive pushing petrochemical producers to slash up to 25% of domestic capacity. President Lee Jae Myung’s administration has labeled the sector in “crisis” as Chinese rivals flood markets with cheaper products from newer, integrated facilities.
Korean producers have been hemorrhaging cash. Lotte Chemical reported losses of ₩1.83 trillion ($1.3 billion) last year, while HD Hyundai Chemical lost ₩284 billion. Domestic naphtha cracker utilization rates have tumbled from the low 80s to around 70% this year.
Whether the capital infusion can restore profitability remains uncertain given persistent oversupply across Asia.
