South Korea approves nearly $1.4-B petrochemical restructuring deal as supply glut weighs
South Korea's industry ministry said it has approved the country's first petrochemical industry restructuring project, offering a support package worth more than 2 trillion won ($1.39 billion) to help companies weather a prolonged sector downturn.
The ministry approved a plan submitted by HD Hyundai Oilbank, Lotte Chemical and their joint venture HD Hyundai Chemical to merge operations at Daesan industrial complex, marking the first approval under a petrochemical restructuring roadmap announced in August last year.
Under the plan, Lotte Chemical's Daesan unit will be spun off and merged with HD Hyundai Chemical to create an integrated entity.
HD Hyundai Oilbank and Lotte Chemical will each inject 600 billion won into the joint venture, for a combined capital increase of 1.2 trillion won. The equity stake in HD Hyundai Chemical will be adjusted to a 50-50 split from the current 60-40 ratio.
As part of the restructuring, Lotte Chemical's Daesan naphtha cracking center (NCC) with an annual capacity of 1.1 million metric tons will halt operations for three years, helping ease an industry-wide oversupply.
South Korea is one of the world's largest importers of naphtha, an oil product that is broken down into chemicals used in plastics for automobiles, electronics, clothing and construction. The country's planned capacity cuts could affect global oil markets.
The government's support package includes up to 2 trillion won in financial assistance from creditor banks, tax breaks, streamlined regulatory approvals, as well as lower utility costs estimated at up to 115 billion won and 26 billion won in research and development funding.
The ministry said it planned to push forward with additional restructuring projects at other petrochemical complexes.
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