The move comes as domestic producers reel from plunging profits and stiff competition from China and the Middle East.
Lotte Chemical’s operating profit plummeted nearly 64 percent in the past year, falling from 2.59 trillion won ($1.9 billion) in 2023 to 916.8 billion won in 2024. HD Hyundai’s petrochemical unit, HD Hyundai Oilbank, saw a similarly steep drop of 58.2 percent, with profits shrinking to 258 billion won over the same period.
In a bid to bolster liquidity, Lotte Group has put its landmark Lotte World Tower up as collateral and divested its Pakistan subsidiary. Now, the company is said to be weighing a more radical step: merging its naphtha cracking center in the Daesan industrial complex with that of HD Hyundai Chemical, a joint venture in which HD Hyundai Oilbank holds a 60 percent stake and Lotte Chemical owns the remaining 40 percent.
Sources familiar with the matter say that under the proposed plan, Lotte would transfer its ethylene production facilities — which have a capacity of 1.1 million tons annually — to HD Hyundai Chemical, consolidating operations with HD Hyundai’s existing 850,000-ton unit at the same site. HD Hyundai would provide additional investment to integrate the assets under a single operating entity.
Industry analysts say the consolidation could generate meaningful cost savings by streamlining operations and reducing overhead, including labor and facility maintenance.
The talks come amid broader efforts within South Korea’s petrochemical sector to restructure in the face of unprecedented external pressures.
Chinese ethylene production has more than doubled in recent years, soaring from 26 million tons in 2018 to an estimated 55 million tons in 2024, according to the Oxford Institute for Energy Studies.
Meanwhile, producers in the Middle East have further disrupted the market, slashing production costs to a third of South Korean levels by leveraging cutting-edge crude-to-chemicals technology.
Lotte and HD Hyundai are not alone in considering consolidation. Industry sources say LG Chem has also approached both companies to discuss potential collaboration or facility reassessments, though no formal agreements have been reached.
The South Korean government is preparing a sweeping policy response.
The ruling Democratic Party has proposed special legislation aimed at revitalizing the sector. The bill includes financial assistance for corporate restructuring, reductions in electricity rates, and exemptions from antitrust laws to facilitate cooperative ventures.
reporter
Kim Dong-young
davekim0807@ajupress.com
Copyright ⓒ Aju Press All rights reserved.
View more comments