Lotte Chemical Indefinitely Shuts Down 1.1 Million Ton Per Year Naphtha Cracker

On September 3, Lotte Chemical’s naphtha cracking complex (NCC) at the Daesan Industrial Complex in South Korea was officially shut down indefinitely, with its associated butadiene extraction unit also ceasing operations. The facility has a designed annual ethylene production capacity of 1.1 million tons. This shutdown marks the transition of South Korea’s “Daesan No. 1” petrochemical industry restructuring project from the approval phase to actual implementation.

According to overseas industry media reports, under the restructuring plan, Lotte Chemical will spin off the assets of its Daesan plant and integrate them with HD Hyundai Chemical to establish a joint venture named H&L Advanced. Lotte Chemical and HD Hyundai Oilbank will each hold a 50% stake in the new company and jointly operate the petrochemical assets within the Daesan complex. Lotte Chemical’s existing naphtha cracker will be shut down, while HD Hyundai Chemical’s naphtha cracker at the complex, with an annual capacity of 850,000 tons, will continue operations. This move aims to optimize the overall production structure of the complex and alleviate the widespread product oversupply and profit pressure facing South Korea’s petrochemical industry.

This restructuring project marks the first implemented case of industrial restructuring in South Korea’s petrochemical sector. It received approval from the Ministry of Trade, Industry and Energy of the Republic of Korea in February 2026. The South Korean government provided a total of KRW 2.1 trillion in fiscal and tax support policies to facilitate the exit of inefficient general-purpose petrochemical capacity and guide the industry’s transition toward high-value-added products. During the approval process, the Korea Fair Trade Commission imposed a five-year antitrust restriction to regulate pricing and supply practices for low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA) copolymer products, thereby mitigating competition risks associated with increased market concentration.

The withdrawal of 1.1 million tons per year of ethylene production capacity will directly reduce the total ethylene capacity of the Dashan Industrial Park by approximately 23%, which will impact the supply landscape for ethylene, propylene, and butadiene in Northeast Asia. Industry analysts point out that the indefinite shutdown of this facility will, to some extent, alleviate the oversupply pressure in the Asian ethylene market, while the subsequent flow of commodities and the pace of import and export trade warrant close monitoring.

In accordance with the master plan, the newly established joint venture will not only shut down inefficient cracking units but also streamline and integrate redundant and inefficient downstream production facilities within the industrial complex. It will increase investment in and expand the layout of high-value-added chemical products, thereby enhancing the overall competitiveness of the Daesan Petrochemical Complex. The South Korean petrochemical industry also plans to promote capacity restructuring in other petrochemical complexes, such as Ulsan, and continue to implement its domestic petrochemical capacity optimization goals.