Lotte Chemical and HD Hyundai Chemical agreed to combine part of their naphtha-cracking facilities.
Under the agreement announced on Wednesday, Lotte Chemical will separate its 1.1 million-ton-per-year naphtha cracker and integrate it into HD Hyundai Chemical's operations. The two companies previously operated separate units at the same site, with HD Hyundai Chemical running an 850,000-ton-per-year facility.
HD Hyundai Co., the parent of HD Hyundai Oilbank — which holds 60 percent of HD Hyundai Chemical — confirmed the plan through a regulatory filing. Lotte Chemical owns the remaining 40 percent of the joint entity.
The consolidation aims to improve operational efficiency amid persistent global oversupply and pressure on profit margins in the petrochemical industry. South Korean producers have faced increasing competition from large-scale, integrated facilities in other regions.
The move aligns with the South Korean government's initiative to encourage structural reform in the sector. Earlier this year, ten leading chemical companies committed to capacity management, with a year-end target set for consolidation efforts.
The Lotte–HD Hyundai Chemical integration represents the first concrete step under this framework and shifts the industry from temporary cost-reduction measures toward long-term structural improvement.
South Korea’s petrochemical sector plays a significant role in the country's export economy. Recent financial challenges, including near-default risks at major operator Yeochun NCC Co., had highlighted the urgency of reform. In August, the government convened key industry players, including LG Chem and Lotte Chemical, to accelerate restructuring discussions.
Industry Minister Kim Jung-kwan on Wednesday called on the Yeosu industrial complex — home to Yeochun NCC and LG Chem — to finalize its own consolidation plans.
While the current oversupply in global markets remains a challenge, the Daesan integration is expected to enhance scale and operational synergy, strengthening the competitiveness of South Korea's petrochemical producers.
Kihyuk Kwon, head of corporate finance at Korea Investors Service, noted during a media briefing on Monday that the sector will continue to require close attention from a financial stability perspective into 2026 amid ongoing market difficulties.
The agreement signals a strategic realignment for South Korea's petrochemical industry, moving toward greater integration and efficiency to support sustained performance in a competitive global landscape.
