KFTC Clears Daesan Petrochemical Merger With LDPE, EVA Safeguards

The Korea Fair Trade Commission (KFTC) has conditionally approved the Daesan No. 1 petrochemical merger involving Lotte Chemical, HD Hyundai Oilbank and HD Hyundai Chemical, while imposing measures to address competition concerns in the domestic low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA) markets.

The decision, announced on August 20, follows the South Korean government’s broader efforts to restructure the petrochemical industry. The Daesan No. 1 restructuring plan received final approval from the Ministry of Trade, Industry and Resources in February. The KFTC’s merger review was conducted separately and focused primarily on the potential impact on market competition.

Under the transaction, Lotte Chemical and HD Hyundai Oilbank will each hold a 50% stake in HD Hyundai Chemical and jointly control the company. The merger will also combine naphtha cracking center (NCC) and other petrochemical facilities previously operated separately by Lotte Chemical’s Daesan petrochemical operations and HD Hyundai Chemical within the Daesan Industrial Complex.

The KFTC identified potential competition risks in the domestic LDPE and EVA sectors because both Lotte Chemical and HD Hyundai Chemical currently operate in these markets. Following the merger, the number of major competitors would fall from four to three, leaving Hanwha, LG and the combined HD Hyundai Chemical entity as the principal producers.

According to the commission, the remaining companies would hold production capacities in an approximate 50:25:25 ratio, while their combined sales volume would exceed 75% of the domestic market. Such concentration could increase the risk of coordinated pricing and make it easier for producers to raise prices.

The KFTC also expressed concern that restructuring could encourage the merged company to discontinue lower-margin and lower-grade LDPE and EVA products. Such supply reductions could place additional pressure on small and medium-sized plastic processors that depend on these materials.

To mitigate these risks, the KFTC imposed corrective measures for five years. Domestic LDPE and EVA price changes will be linked to movements in export prices. The merged company must also continue supplying all LDPE and EVA grades that were being produced when the merger took effect, provided domestic buyers request them.

The KFTC further prohibited the exchange of sensitive competitive information, including prices, production quantities, costs and inventory data, between the relevant companies and affiliates. Concurrent employment of personnel between HD Hyundai Chemical and Lotte Chemical was also prohibited.

Separately, HD Hyundai Chemical plans to establish cooperative partnerships with suppliers, with further details expected after discussions with the KFTC.

Product Impact

The merger should improve operational efficiency by integrating NCC and downstream petrochemical assets, potentially lowering production costs and strengthening HD Hyundai Chemical’s competitiveness. However, the KFTC’s safeguards will limit the company’s ability to raise LDPE and EVA prices sharply or withdraw low-margin grades. For LDPE and EVA, this could keep domestic supply relatively stable and reduce the likelihood of sudden price spikes. At the same time, tighter market concentration could provide underlying support to prices if demand improves. For other tracked commodities such as ethylene, naphtha and related olefins, integrated operations may improve cost efficiency, while restructuring-related supply optimization could create moderate price support over the longer term.