South Korea's HD Hyundai, Lotte Chemical submit plan to restructure petrochemical businesses

South Korea's HD Hyundai and Lotte Chemical have submitted a plan to the industry ministry on restructuring their petrochemical businesses, the companies said in separate regulatory filings.

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Under the plan, Lotte will spin off its business in Daesan city, South Korea, and merge it with HD Hyundai Chemical, in an effort to ease overcapacity at naphthacracking centres in the industry, the companies said.

The plan is part of an industry-wide effort to ease a supply glut in South Korea's petrochemical sector. In August, President Lee Jae Myung's administration pushed firms to cut as much as 25% of the country's annual capacity, saying the sector was in "crisis" and needed to boost efficiency and raise margins.

Ten petrochemical firms agreed on the goal at the time and were asked to come up with their own plans.

The government aims to cut naphtha-cracking capacity by up to 3.7 million metric tons per year to resolve oversupply and improve profit margins by merging production or shutting smaller companies and has required firms to submit plans by year-end.

Lotte said the merger is to increase efficiency and the stability of operations at their naphtha-cracking centres, without elaborating. The companies said they will also adjust business portfolios to focus on core businesses.