Lotte Chemical and HD Hyundai Chemical agreed to mix a part of their naphtha-cracking amenities as South Korea’s prime petrochemicals producers reply to a protracted oversupply and weakening margins.
Lotte Chemical will break up its facility on the Daesan petrochemical advanced in South Chungcheong Province and fold it into HD Hyundai Chemical’s operations, in accordance with separate statements from Lotte. The 2 corporations had individually operated 1.1-million-ton-a-year and 850,000-ton-a-year items on the identical website earlier than Wednesday’s announcement.
HD Hyundai Co., the mum or dad firm of HD Hyundai Oilbank Co. additionally confirmed the consolidation plan by a regulatory submitting. HD Hyundai Oilbank at the moment owns 60% of HD Hyundai Chemical whereas Lotte Chemical owns the remainder.
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South Korean crops are designed to show naphtha — a crude oil derived product — into petrochemicals that may go into making every thing from plastic luggage to pipes and even paint solvents. These items are struggling to compete with huge and totally built-in Chinese language complexes, a lot of which have sprung up within the final decade.
The South Korean authorities has been urgent for business reform, which resulted in 10 main chemical corporations pledging to curb capability and a year-end deadline set for consolidation. The Lotte-Hyundai mixture is the primary restructuring below the federal government plan.
For Korea’s chemical compounds business, the Lotte–HD Hyundai deal marks a shift from incremental price cuts to structural consolidation. For international rivals, notably Chinese language or Center Jap producers, it alerts that South Korea is now not sticking with the standalone, fragmented and cost-disadvantaged mannequin.
Petrochemical is certainly one of South Korea’s main export sectors and weakening financials of a serious operator turned a flashpoint for the struggling business this yr. Yeochun NCC Co., certainly one of Korea’s largest ethylene producers, confronted a close to default till it secured emergency financing from main shareholders.
That partly prompted the federal government to summon main gamers in August, together with LG Chem Ltd. and Lotte Chemical, to debate restructuring plans. A profitable merger might pave the way in which for additional consolidation. Trade Minister Kim Jung-kwan on Wednesday urged Yeosu advanced to attract up reform plans, which options Yeochun NCC as the primary operator alongside LG Chem.
Earlier stopgap measures — together with divesting abroad stakes — have carried out little to stem document losses. The petrochemical sector would require shut monitoring from a credit score perspective in 2026 amid a protracted downturn, Kihyuk Kwon, head of company finance division at Korea Traders Service, mentioned throughout a media briefing on Monday.
Whereas the consolidation gained’t resolve the worldwide oversupply, it offers South Korea’s petrochemical sector a combating likelihood. In an business the place scale, integration and feedstock effectivity outline survival, this might mark the beginning of a long-awaited revival.
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