South Korea Approves Lotte-HD Hyundai Daesan Petrochemical Merger — OPIS

The South Korean Ministry of Trade, Industry and Energy on Monday approved the first consolidation under its petrochemical restructuring roadmap, merging the Daesan assets of Lotte Chemical, HD Hyundai Oilbank, and their joint venture HD Hyundai Chemical, with the deal including the shutdown of Lotte's 1.1 million metric ton per year naphtha cracker, according to a news release issued Wednesday.

The merger integrates the companies' naphtha cracking and downstream petrochemical units, following a broader restructuring plan announced last August to address overcapacity. The plan targets a total national reduction of up to 3.7 million metric tons of naphtha cracking capacity.

OPIS previously reported that other major South Korean producers, including LG Chem and Yeochun NCC, submitted restructuring plans late last year, including proposals to phase out older cracking capacity or consolidate operations.

The inaugural three-year project will receive a government support package worth 2.1 trillion won ($1.5 billion). Lotte Chemical and HD Hyundai Oilbank will each invest 600 billion won--totaling 1.2 trillion won--to establish the joint venture with a 50:50 ownership split.

Operating rates at the remaining facilities are expected to increase, the ministry said. Hyundai Chemical operates a cracker with 850,000 mt/year of ethylene capacity in Daesan, according to OPIS data.

While the scrapping of Lotte Chemical's Daesan cracker could help ease some oversupply pressure in the chemical industry, the merger underscores the mounting pressure faced by petrochemical makers. Several crackers, including Lotte Chemical, GS Caltex and KPIC, reduced run rates in February by 5%-7%, according to sources, citing eroding margins amid lackluster demand.

Spot cash margins for naphtha-fed steam crackers in Northeast Asia have remained negative, at minus $293/mt in the week ended Feb. 12, widening from minus $260/mt a week earlier, according to data from Chemical Market Analytics by OPIS.

Adding to market pressure, CFR Japan open-specification naphtha prices have trended higher since the start of the year, climbing to $614.25/mt as of Tuesday before easing to $613.50/mt on Wednesday, compared with $567/mt a month earlier, according to OPIS data. Firmer feedstock costs have further dampened downstream demand, forcing crackers to scale back operations.

Amid the restructuring, LPG market sources said they have already observed a decline in South Korea's LPG imports since the plan was first announced in August, as most South Korean crackers are designed with feedstock flexibility.

"Many of the affected cracking facilities, including Lotte Chemical's, are flexible crackers that can use LPG as feedstock. This means South Korean LPG demand is also expected to decline," a source said.

Vortexa data showed South Korea's LPG imports stood at 796,000 mt in August last year when the restructuring plan was announced. Volumes fell to 708,300 mt in January, with February imports estimated at 492,300 mt.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Cheryl Lee, clee@opisnet.com and Yiwen Ju, yju@opisnet.com; Editing by Lujia Wang, lwang@opisnet.com

(END) Dow Jones Newswires

February 25, 2026 06:46 ET (11:46 GMT)