The government and industry are discussing the restructuring of the petrochemical industry, with Lotte Chemical and HD Hyundai injecting a total of KRW 800 billion into their joint venture, HD Hyundai Chemical. This move demonstrates their willingness to 'share the burden' at the level of major shareholders while requesting financial support from the main creditor bank.

According to financial circles and related ministries on the 3rd, HD Hyundai Oilbank, which has Lotte Chemical and HD Hyundai Chemical as subsidiaries, submitted a self-rescue plan to the Ministry of Trade, Industry and Energy, including a capital increase plan of KRW 800 billion. The core of this plan is for Lotte and HD Hyundai to each inject KRW 400 billion into their joint venture, HD Hyundai Chemical, located in the Daesan Petrochemical Complex in Seosan, Chungnam.

On the same day, the two companies also applied for 'financial support' from their main creditor bank, the Korea Development Bank. Under the creditor group’s self-regulatory agreement, petrochemical companies undergoing business restructuring can request financial support from their main creditor bank.

To enhance the effects of business restructuring, the two companies decided to completely halt the operation of the naphtha cracking center (NCC, 1.1 million tons) owned by Lotte Chemical for ethylene production. If the NCC at the Daesan Petrochemical Complex is consolidated, the ethylene production capacity of the two companies, which is 1.95 million tons annually, will be reduced to 850,000 tons (produced only by HD Hyundai Chemical). This measure is interpreted as a response to the prolonged oversupply of ethylene due to large-scale facility investments in China.

If Lotte Chemical receives financial support, it plans to convert the NCC, which will cease operations, into a high-value-added specialty production line. To ensure there are no layoffs during the consolidation process at the Daesan Petrochemical Complex, all Lotte Chemical employees will be reassigned to HD Hyundai Chemical.

In the financial sector, there is an expectation that the restructuring of the Daesan Petrochemical Complex will accelerate, as the two companies have applied for financial support from the Korea Development Bank. The bank plans to convene a creditor group self-regulatory meeting this week to review specific financial support measures.

The legal basis to support the restructuring of petrochemical companies is already in place. The 'Special Act on Strengthening Competitiveness and Support for the Petrochemical Industry' passed the National Assembly plenary session on December 2. This special act includes provisions for △integration and simplification of various licensing procedures △support for R&D for high-value-added and eco-friendly transitions △financial support △tax support.

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