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HD Hyundai Oilbank, Lotte Chemical get first petrochemical restructuring green light

Published: 25 Feb. 2026, 18:45

Lotte Chemical's Daesan Plant in Seosan, South Chungcheong, is seen in this file photo [JOONGANG ILBO]

The government approved the petrochemical industry’s first restructuring plan, known as the Daesan No. 1 Project, as domestic companies seek to respond to a prolonged crisis led by oversupply from global competitors.

Under the new plan, HD Hyundai Oilbank and Lotte Chemical will each invest 600 billion won ($419 million) to establish a new joint entity and suspend operations at one ethylene production facility. The government will provide a combined financial and tax support package worth 2.1 trillion won.

The Ministry of Trade, Industry and Resources on Wednesday granted final approval to the business restructuring plan submitted by HD Hyundai Oilbank, HD Hyundai Chemical and Lotte Chemical at a meeting of economy-related ministers and a session on industrial competitiveness.

The case marks the first approval under the petrochemical industry restructuring road map announced in August last year.

“This project is the first case where companies have proactively and voluntarily pursued restructuring at an industrywide level, rather than responding to distress at individual firms,” Industry Minister Kim Jung-kwan said at the meeting.

Under the plan, Lotte Chemical will spin off its Daesan complex in South Chungcheong. The spun-off unit will be merged with HD Hyundai Chemical to establish a new integrated entity. As part of self-rescue efforts, the two companies will each inject 600 billion won, totaling 1.2 trillion won, into the new corporation.

Industry Minister Kim Jung-kwan, second from right, poses for a photo with CEOs from petrochemical companies during a meeting at the Korea Trade-Investment Promotion Agency headquarters in Seocho District, southern Seoul, on Feb. 25. [NEWS1]

Lotte Chemical’s naphtha cracking center in Daesan, which has an annual ethylene capacity of 1.1 million metric tons, will be shut down. Overlapping or loss-making facilities operated by the two companies will also be suspended.

The government will provide a support package covering financing, taxation and regulatory approvals. The largest is a 2 trillion won financial support package. Financial institutions will extend 1 trillion won in new loans to support restructuring and improve financial stability. Up to 1 trillion won in existing loans will be converted into perpetual bonds.

Acquisition and registration taxes arising from corporate spinoffs and mergers will be reduced by 75 percent to 100 percent. Corporate tax burdens related to facility closures and asset sales will also be eased.

The government will designate Daesan as a distributed energy special zone to ensure price competitiveness. Companies located there will be able to pay electricity rates 4 to 5 percent lower than the rates charged by Korea Electric Power Corporation. The duty-free period for imported naphtha and crude oil will also be extended.

Vehicles drive by the entrance of Lotte Chemical's Daesan Plant in Seosan, South Chungcheong, on Aug. 31, 2025. [JOONGANG ILBO]

More than 26 billion won will be allocated to support research and development aimed at transitioning the petrochemical sector toward high-value-added and environmentally friendly products.

The government will encourage companies to move away from export-driven business models centered on standardized, low-differentiation products. It will instead promote high-value-added items such as high-elasticity lightweight materials and organic solvents used in secondary battery electrolytes.

The Industry Ministry is also reviewing the possibility of additional electricity rate reductions beyond the distributed energy special zone framework.

“We are discussing time-of-use pricing and regionally differentiated rates,” an Industry Ministry official said. “Consultations are also ongoing to ensure that regions and industries participating in restructuring efforts can benefit.”

Industry Minister Kim Jung-kwan, center, speaks during a meeting on business restructuring plans for the petrochemical industry at the Korea Chamber of Commerce and Industry headquarters in Jung District, central Seoul, on Dec. 22, 2025. [NEWS1]

The government expects the restructuring to help alleviate oversupply and improve operational efficiency. It projects that companies will return to profitability after the three-year restructuring period and significantly lower their debt ratios.

Following approval of the first project, the government plans to accelerate additional restructuring initiatives. Yeosu and Ulsan have been mentioned as potential sites for future similar initiatives.

“The success of this petrochemical industry restructuring hinges on the successful completion of projects across all industrial complexes,” Kim said. “We pledge continued communication with companies to ensure that follow-up projects proceed without delay.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY NAM SOO-HYOUN [[email protected]]