South Korea has announced a significant financial support package of 2.1 trillion won ($1.46 billion) to bolster the nation’s inaugural petrochemical restructuring initiative. This investment will support the overhaul of the Daesan complex, a collaboration between Lotte Chemical Corp. and HD Hyundai Chemical, with the aim of expediting broader self-rescue endeavors within the petrochemical industry.
The Ministry of Trade, Industry and Resources revealed this financial commitment at a ministerial meeting focused on strengthening industrial competitiveness, alongside specific policy measures directly linked to the Daesan project.
“The government, along with its creditor banks, will provide unwavering support to the pioneering Daesan project, ensuring a seamless and proactive restructuring process,” stated Deputy Prime Minister for the Economy Koo Yun-cheol.
Regulatory bodies approved the restructuring plan earlier in the week, marking a pivotal moment since Seoul introduced an industry-wide roadmap in August. This roadmap encourages voluntary consolidation across the sector, addressing challenges such as oversupply and diminished profitability.
The restructuring involves Lotte Chemical spinning off its plant located at the Daesan petrochemical complex in Seosan, South Chungcheong Province. This spun-off entity will then merge with HD Hyundai Chemical, a joint venture already established between Lotte Chemical and HD Hyundai Oilbank. Both Lotte Chemical and HD Hyundai Oilbank will invest 600 billion won each into the new, combined entity, thereby securing equal ownership stakes.
Over the next three years, Lotte’s naphtha cracking center will temporarily cease operations, and downstream facilities at both the Lotte and HD Hyundai sites will undergo scaling back. The newly formed company intends to strategically shift its focus towards the production of higher-margin products, including high-elasticity plastics, advanced battery materials, and environmentally friendly outputs derived from ethane and bionaphtha.
The establishment of the new entity is anticipated by September, with capacity reductions slated to commence within the same year.
The financial support package includes up to 2 trillion won in the form of new funding and the conversion of existing loans into perpetual bonds. The remaining funds will be allocated to tax incentives and regulatory relief measures.
Authorities will also grant repayment deferrals on approximately 7.9 trillion won of debt covered under the restructuring agreement through 2028, while upholding existing lending terms.
Detailed financing strategies will be finalized in consultation with policy lenders and other creditor institutions involved in the project.
The Daesan approval is expected to catalyze further restructuring efforts at other petrochemical complexes. In Yeosu, South Jeolla Province, Yeochun NCC – a joint venture between Hanwha Solutions and DL Chemical – is actively preparing a restructuring proposal. Meanwhile, LG Chem and GS Caltex are engaged in discussions regarding a potential joint venture. In Ulsan, SK Geo Centric, Korea Petrochemical Ind. Co., and S-Oil are participating in related discussions.
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