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Lotte Chemical Corp. and HD Hyundai Co. are in advanced negotiations to consolidate their naphtha cracking operations at the Daesan petrochemical complex, in what could mark South Korea’s first major self-initiated restructuring among domestic chemical producers.

According to local media reports, discussions began earlier this year as both conglomerates explore the possibility of merging their respective assets. The talks follow Lotte Chemical’s earlier, unsuccessful attempts to pursue similar integration efforts with other domestic players, including LG Chem Ltd. and DL Chemical Co.

At the heart of the proposed consolidation is HD Hyundai Chemical – a joint venture formed in 2014 between Lotte Chemical and HD Hyundai Oilbank, with ownership split 60:40. The JV currently operates a steam cracker with a nameplate capacity of 850,000 tons/year of ethylene and 500,000 tons/year of propylene.

Separately, Lotte Chemical operates its own naphtha cracker at the Daesan complex, producing 1 million tons of ethylene and 500,000 tons of propylene annually. This output represents approximately 20% of the company’s total ethylene capacity, which stands at 4.5 million tons per year.

The proposed merger is intended to streamline overlapping operations, improve cost efficiency, and enhance feedstock procurement leverage. Shared plant management, rationalised labour structures, and a unified operational strategy are expected to deliver substantial savings. In addition, consolidation would help eliminate internal competition and foster greater coordination within South Korea’s increasingly fragmented petrochemical sector.

One scenario under active consideration involves Lotte Chemical transferring its Daesan naphtha cracking assets into the existing HD Hyundai Chemical joint venture. In exchange, HD Hyundai Oilbank would inject additional capital – either in cash or in kind – to rebalance equity stakes and enable a full integration under a single corporate entity.

Industry analysts view the talks as a potentially pivotal moment for the domestic petrochemical industry. “This could set a precedent and prompt a long-overdue wave of consolidation across the sector,” noted one analyst, citing structural overcapacity and sustained margin pressures in core product lines.

Lotte Chemical is also pursuing broader integration discussions beyond Daesan. The company remains engaged in dialogue with LG Chem regarding facility synergies and has reportedly initiated exploratory talks with SK Energy Co. and Korea Petrochemical Ind. Co. about potential collaborative models in Ulsan.

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