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Satellite View of the Daesan Petrochemical Complex with Manufacturing Sites from 롯데케미칼 (Lotte Chemical) | LG화학 (LG Chem) | 한화토탈에너지스 (Hanwha TotalEnergies) | HD현대케미칼 (HD Hyundai Chemical) | HD현대오일뱅크 (HD Hyundai Oilbank) | 코오롱인더스트리 (Kolon Industries) | 한화솔루션 (Hanwha Solutions) | 현대OCI (Hyundai OCI) | via Goggle Maps

South Korea’s petrochemical sector is undergoing a pivotal transformation as Lotte Chemical and Hyundai Chemical advance plans to integrate their naphtha cracking facilities at the Daesan Petrochemical Complex. This consolidation is a direct response to China’s overwhelming ethylene overcapacity—a structural market shift that has eroded profitability across Asia. By merging operations, the companies aim to fortify competitiveness through operational synergies and strategic realignment, setting a precedent for industry-wide adaptation.

China’s Ethylene Oversupply: The Imperative for Restructuring

China’s aggressive petrochemical expansion has created a global supply glut, with ethylene capacity in 2025 is forecast to be 121% more than local demand. This surplus has flooded international markets, compressing margins for producers reliant on naphtha feedstock, like those in Korea. Lotte Chemical’s 64% operating profit decline and HD Hyundai’s 58% drop reflect the severity of this pressure. The Daesan integration addresses this crisis by targeting ₩70–100 billion in annual savings through shared infrastructure, streamlined management, and optimized feedstock procurement.


 Daesan Petrochemical Complex Aerial View | Hyundai Engineering & Construction (Accessed 14^th June 2025)

The Daesan Integration: Scope and Strategic Rationale

The merger centers on combining Lotte Chemical’s 1.1 million-ton ethylene facility with HD Hyundai Chemical’s 850,000-ton unit at Daesan—a joint venture already co-owned by both entities. This consolidation will unify control over naphtha cracking technologies and derivative production, including polyethylene, propylene, and aromatics. Critically, it leverages the Daesan complex’s proximity to Chinese markets while mitigating the cost disadvantages Korean players face against Middle Eastern and North American rivals.


 Lotte Chemical's domestic petrochemical complex in Daesan, South Chungcheong province (Courtesy of Lotte Chemical) | via The Korea Economic Daily, 7^th Feb 2022 

Beyond Cost Savings: Portfolio Diversification and Innovation

While cost savings are vital, the merger’s strategic value lies in enabling portfolio diversification. The integrated entity can redirect capital from commoditized products toward high-value sectors, such as advanced materials and feedstock innovation, including exploration of crude-to-chemicals (TC2C) processes to bypass naphtha volatility. This shift aligns with Korea’s broader industrial policy, which now incentivizes specialization over volume-driven growth.


 TC2C Block Flow Diagram - © portfolio planning PLUS

Industry-Wide Implications and Policy Support

The Lotte-Hyundai initiative transcends bilateral cooperation—it signals a necessary evolution for Korea’s petrochemical industry. As China’s overcapacity persists, further consolidation is inevitable. The Korea Chemical Industry Association, supported by government and consulting reports, advocates reducing generic capacity by as much as 50%, particularly in hubs like Daesan and Yeosu where overlapping facilities are most concentrated. Legislative proposals now offer tax incentives for coordinated output cuts, and the government is expected to use a “carrot and stick” approach to accelerate reform, rewarding active participants in restructuring while withholding support from those that resist.

Conclusion: A Template for Resilience in the Asian Petrochemical Sector

China’s ethylene oversupply has irrevocably altered the petrochemical landscape, making the Lotte-HD Hyundai integration a tactical imperative rather than an optional efficiency play. By transforming Daesan into a hub of optimized production and innovation, the partnership offers a template for Korean industry resilience. Success will depend on sustained commitment to high-value differentiation and policy-supported restructuring—a path that may define Asia’s chemical sector for decades.

#lotte  #lottechemical  #hyundai  #hyundaichemical  #daesan  #korea  #petrochemicalcomplex  #naphthacracker  #ethylene  #oversupply  #consolidation

Cilegon Plant - LOTTE Indonesia New Ethylene (LINE). Credit: PT Lotte Chemical Indonesia

PT Lotte Chemical Indonesia (LCI) is undergoing a transformative phase marked by significant investment, new long-term supply agreements, and persistent industry headwinds. The company’s strategy and recent developments provide insight into both its growth ambitions and the broader challenges facing the Southeast Asian petrochemical sector.

Major Expansion: New Cracker Facility

LCI is set to commence operations at its new mixed-feed cracker in Cilegon, Banten province, Indonesia, in the second half of 2025. This facility, part of a $3.95 billion investment, will have an annual production capacity of 1 million metric tons of ethylene. The new cracker is a central component of the Lotte Chemical Indonesia New Ethylene (LINE) project, which aims to strengthen the company's upstream integration and supply chain resilience.

Strategic 10-Year Ethylene Supply Deal

In May 2025, LCI secured a 10-year ethylene supply contract with PT Asahimas Chemical, an integrated chemical producer in Indonesia. The contract, effective from July 1, 2025, to June 30, 2035, commits LCI to supply approximately 150,000 tonnes of ethylene per year to Asahimas Chemical. The agreement’s value is expected to exceed 10% of Lotte Chemical Titan (the Malaysian-listed parent)'s latest annual consolidated revenue, underlining its financial significance. Pricing for the contract is pegged to prevailing market rates, ensuring flexibility in a volatile market environment. The long-term deal provides both revenue stability for Lotte Chemical and supply security for Asahimas, supporting downstream chemical industries in Indonesia.

Financial and Market Pressures

Despite these strategic moves, Lotte Chemical Titan continues to face financial challenges. The company reported its eighth consecutive quarterly loss in Q1 2025, though losses narrowed year-on-year due to improved product spreads and contributions from its US associate. For Q1 2025, Lotte Chemical Titan posted a net loss of RM125.67 million, compared to RM178.03 million a year earlier, with revenue dropping 22.3% to RM1.49 billion on lower sales volume and prices. The global petrochemical sector is currently experiencing margin compression due to oversupply, particularly from China, which has weighed on profitability and forced companies like Lotte Chemical to operate existing Malaysian crackers at reduced capacity (45%-50% since December 2024).

Ownership Restructuring and Strategic Flexibility

To bolster its financial position, Lotte Chemical reduced its stake in the Indonesian venture from 49% to 24% in early 2025, selling the shares to a consortium of South Korean financial institutions. Lotte Chemical Titan retains a 51% stake in Lotte Chemical Indonesia. The company is also exploring feedstock flexibility for the new cracker, planning to source naphtha from the Middle East and potentially substitute up to 50% of naphtha feedstock with natural gas liquids such as LPG or ethane, depending on market economics.

Sector Outlook and Strategic Positioning

The Southeast Asian petrochemical industry is in a phase of consolidation, with mergers and acquisitions on the rise as companies seek to enhance shareholder value amid challenging conditions. Lotte Chemical’s long-term supply contract and the new Indonesian cracker position it to capitalize on regional  demand growth, even as it navigates short-term market volatility and restructuring pressures. The new supply agreement is not expected to impact the company’s share capital or ownership structure, maintaining stability for investors.

Conclusion

Lotte Chemical Indonesia’s ambitious expansion and strategic supply agreements reflect a commitment to long-term growth and regional market leadership. However, the company continues to navigate a difficult economic landscape characterized by global oversupply, margin pressure, and the need for financial restructuring. The coming years will be pivotal as the new cracker comes online and the company seeks to leverage its strengthened position in Indonesia’s growing chemical sector.

#lotte  #lottechemical  #indonesia  #malaysia  #lci  #lineproject  #cilegon  #asahimas  #agc  #asahiglass  #ethylene  #steamcracker  #ethyleneplant 

KUALA LUMPUR (March 6): Lotte Chemical Titan Holding Bhd announced that its parent company, Lotte Chemical Corporation (LCC), is selling a 25% stake in PT Lotte Chemical Indonesia (LCI), which will lower LCC's direct interest in the Lotte Chemical Indonesia New Ethylene Project to 24% from 49%.

LC Titan, in which LCC controls 75.86%, holds the remaining 51% stake in LCI.

LC Titan said LCC has received an offer from a group of companies — comprising one securities company and five special purpose corporations set up by five other securities companies — for the 25% stake in LCI for US$462.7 million (about RM2.05 billion).

LC Titan, which has a right of first refusal to the stake that LCC is selling to a third party at the offer price that LCC gets — based on a 2019 shareholders agreement between LCI, LC Titan and LCC — has decided not to take up the offer. 

"The board of directors of LC Titan wishes to announce that the Board had deliberated and made a decision not to accept the offer by LCC to purchase the sale shares held by LCC in LCI for US$462.7 million," LC Titan's bourse filing read.

Therefore, while LC Titan's stake in LCI will remain at 51%, its parent's direct interest in the ethylene project in Indonesia will be reduced to 24% following the stake sale.


#lci  #lotte  #lottechemical  #indonesia  #shareholding 

Polyolefin plants with technologies and capacities have been added.

#lotte #lottechemical  #malaysia  #unipolpe  #univation  #lyondellbasell  #spheripol 

Polyethylene plants with technologies and capacities have been added.


#lyondellbasell  #spheripol  #mitsui  #mitsuicx  #hdpe  #ldpe  #lottechemical  #malaysia 

LCTN Merak plant and productions added.
 

#ineos #innovene  #gasphasepe  #polyethylene  #lctn  #lottechemical  #titan  #indonesia 

Lotte Chemical Titan (LCT) entities and production sites in Malaysia have been created.

LCT (M) Sdn Bhd is 1the manufacturing entity and a 100% subsidiary of LCT Holding Berhad, itself a subsidiary controlled by Lotte Chemical Corporation in Korea. 

LCT (M) Sdn Bhd operates two manufacturing sites in Pasir Gudang and Tanjung Lansat. 


#lottechemical  #lottechemicaltitan  #lct  #malaysia