Corporations that submitted petrochemical business restructuring plans to the government are focusing on the "Daesan Project No. 1," whose outline will emerge in January. The project is expected to spell out in detail what support measures the government will apply to the business restructurings of HD Hyundai Chemical and LOTTE Chemical. Petrochemical corporations that will pursue restructuring next are expected to use it as a reference and submit their final plans around the first quarter of next year.
According to the petrochemical industry on the 26th, Minister Kim Jung-kwan of the Ministry of Trade, Industry and Energy met on the 22nd with chief executive officers (CEOs) of petrochemical corporations that had submitted restructuring plans to review progress and gather views on the schedule ahead. The term "Daesan Project No. 1" appeared for the first time that day.
HD Hyundai Chemical and LOTTE Chemical, the corporations subject to the Daesan Project No. 1, were the first to respond to the government's voluntary restructuring roadmap. They submitted plans centered on integrating and reducing naphtha cracking center (NCC) capacity, setting a precedent for voluntary restructuring. Taking those efforts into account, the industry expects sufficient support measures to be included.
Based on the restructuring plans submitted by HD Hyundai Chemical and LOTTE Chemical, the government is reviewing a comprehensive support package that includes financial support, tax benefits, research and development (R&D) support, and regulatory easing. The Daesan Project No. 1 is currently in the preliminary review stage and is expected to receive final approval around January. Bond-holding financial institutions plan to finalize financial support measures through consultations based on the due diligence now underway.
HD Hyundai Chemical and LOTTE Chemical plan to proceed with the current restructuring plans as is, without submitting final restructuring plan documents. Other petrochemical corporations intend to review the Daesan Project No. 1 and submit their final restructuring plan documents within the first quarter of next year. If the project appeals to corporations, it could give momentum to restructurings at other industrial complexes such as Ulsan and Yeosu.
A petrochemical industry official said, "What the Daesan Project No. 1 contains is the most important point. We can see what parts the government will support for corporations. Based on the support measures, we will determine what applies to our corporation and what more is needed, and then convey that to the government."
Another official said, "If the Daesan Project No. 1 is approved around January next year, we plan to prepare the next steps based on it. There is a general direction—such as lower electricity rates, tax benefits, and R&D support—but the specifics have not yet been shared. Since what is actually needed differs by corporation, we expect to get ideas from the contents of the Daesan Project No. 1."
As the petrochemical industry has consistently raised concerns about the burden from higher industrial electricity rates, the Daesan Project No. 1 could include related support measures. However, some assess that the likelihood is not high due to equity issues with other industries.
Because most petrochemical restructuring plans involve transferring or acquiring production facilities or equity among corporations, measures to ease burdens related to acquisition tax and capital gains tax are highly likely to be included. Incentives tied to shifting business structures toward high value-added and specialty products are also likely.
An official at the Ministry of Trade and Industry (MOTI) said, "In the Daesan Project No. 1, we plan to present a concrete proposal on what the government is considering," adding, "We will continue close communication with the industry so that other projects can also prepare restructuring plan documents as soon as possible."
Meanwhile, after the government set a capacity reduction target of 2.7 million to 3.7 million tons (t) in August, petrochemical corporations submitted all their restructuring plans as of the 19th of this month.
At the Daesan industrial complex, closure of LOTTE Chemical's Daesan plant (1.1 million t per year) is likely. In the case of the Yeosu industrial complex, LG CHEM and GS Caltex are said to be considering establishing a joint venture and closing LG CHEM's Plant 1 (1.2 million t per year).
Yeochun NCC is reportedly considering closing its idle Plant 3 (470,000 t per year) and additionally shutting either Yeochun NCC Plants 1 or 2 or LOTTE Chemical's Yeosu plant.