LOTTE Chemical Cancels Ulsan PET Chemical Recycling Investment Amid Petrochemical Downturn
LOTTE Chemical has halted the remaining investment in a chemical recycling project for waste polyethylene terephthalate, or PET, at its Ulsan plant in South Korea, shelving plans for a large-scale depolymerization facility that was intended to support production of chemically recycled PET.
The South Korean chemicals producer disclosed on September 17 that its board had decided to discontinue the investment because of changes in market conditions, a prolonged downturn in the petrochemical sector and the company's participation in broader industry restructuring.
The decision brings to an end, at least for now, an investment program that LOTTE Chemical first approved in May 2021 as part of plans to turn its Ulsan operations into a major base for plastic recycling.
According to the company's regulatory disclosure, the investment had originally been valued at KRW 77 billion, approximately $56 million at recent exchange rates. LOTTE Chemical ultimately spent about KRW 16.6 billion before stopping the project, leaving roughly KRW 60.4 billion of planned expenditure uncommitted.
Depolymerization Plant Will Not Proceed
At the center of the project was a planned depolymerization facility designed to process approximately 45,000 metric tons of waste PET annually.
Depolymerization is a chemical recycling process that breaks PET down into smaller chemical building blocks. In LOTTE Chemical's proposed system, waste PET would have been converted into bis(2-hydroxyethyl) terephthalate, or BHET, which could then be purified and repolymerized into PET resin.
Chemical recycling can potentially handle some PET waste that is more difficult to process through conventional mechanical recycling, including colored or lower-quality material. Because the polymer is broken down and rebuilt, the resulting material can also potentially reach specifications required for higher-value applications.
The BHET facility was intended to supply a 110,000-metric-ton-per-year chemically recycled PET, or C-rPET, production system at LOTTE Chemical's Ulsan Plant 2.
The company had originally targeted completion of the integrated recycling project by 2024. Its longer-term strategy envisaged converting the entire 340,000-metric-ton PET production capacity at the Ulsan site to C-rPET by 2030.
Progress, however, stopped well short of that original ambition.
LOTTE Chemical completed modifications to its C-rPET production facilities in 2022 and carried out trial production of about 4,200 metric tons over a 20-day period. Engineering design work for the BHET depolymerization facility was also completed, but construction of the main depolymerization plant did not proceed.
The investment timetable had already been extended from its initial target to the end of 2027 before the company decided to terminate the remaining program altogether.
Recycling Ambitions Meet Difficult Economics
The cancellation illustrates some of the economic challenges facing chemical recycling projects as petrochemical producers deal with weak margins and excess conventional resin capacity.
South Korea's petrochemical sector has been under sustained pressure from additional production capacity in China and weaker profitability across several commodity chemical markets. LOTTE Chemical specifically cited the prolonged petrochemical downturn as one of the factors behind its Ulsan decision.
Recycled plastics can face additional cost pressures because collection, sorting, preprocessing, and chemical conversion add expenses that virgin polymer producers may not face to the same degree. Chemical recycling facilities can also require significant upfront capital and energy-intensive processing.
Market conditions for recycled PET have also remained difficult in parts of Asia. S&P Global Commodity Insights' Platts assessed food-grade recycled PET pellets in Southeast Asia at $1,235 per metric ton FOB on September 18, with market reporting pointing to thin trading activity and weak export demand from Europe and the United States.
The economics therefore depend not only on recycling technology but also on demand from brands and packaging producers, access to suitable waste feedstock, regulatory requirements for recycled content and the relative price of virgin resin.
Existing Ulsan Investment Could Still Have a Future
LOTTE Chemical has not necessarily closed the door permanently on chemical PET recycling.
The C-rPET equipment already completed at Ulsan is expected to remain in place rather than being dismantled. Korean reporting has indicated that the company could reconsider the project if market conditions and the recycling ecosystem become more favorable.
This leaves LOTTE Chemical with infrastructure that could potentially be brought back into use without rebuilding the project from the beginning.
Before the investment was halted, the company had also worked on establishing a supply chain for recycled PET feedstock. In 2022, LOTTE Chemical signed a memorandum of understanding with waste-management company GE Technology covering the potential supply of approximately 40,000 metric tons of PET flakes annually for the C-rPET project.
The company has also pursued recycling outside the PET project, including post-consumer recycled polycarbonate, ABS and polypropylene products, as well as the use of waste-plastic-derived pyrolysis naphtha in petrochemical production.
LOTTE Chemical's sustainability strategy therefore continues to include circular materials, although the specific scale and timing of earlier recycled-plastics targets are being reassessed. Its 2024 ESG reporting said that specific recycled-product targets would be reset after monitoring regulatory and market developments.
Capital Redirected Toward Petrochemical Restructuring
The Ulsan decision also needs to be viewed in the context of a much larger restructuring of LOTTE Chemical's conventional petrochemical operations.
South Korea's Ministry of Trade, Industry and Resources approved the country's first major petrochemical restructuring project in February 2026. Under the plan, LOTTE Chemical agreed to separate its Daesan operations and combine them with HD Hyundai Chemical.
The restructuring subsequently created H&L Advanced, jointly controlled by LOTTE Chemical and HD Hyundai Oilbank, with each company holding a 50% stake. The transaction is designed to rationalize petrochemical production capacity and increase the share of higher-value specialty materials.
LOTTE Chemical's board separately approved a KRW 600 billion capital injection into H&L Advanced to help repay borrowings and strengthen the new company's financial structure. That commitment was announced at roughly the same time as the cancellation of the Ulsan recycling investment.
The restructuring also involves HD Hyundai Oilbank and has received government scrutiny and support. South Korea's Ministry of Trade, Industry and Resources described the Daesan project as the first approved initiative under the country's Petrochemical Industry Restructuring Roadmap, accompanied by a support package exceeding KRW 2.1 trillion in financing and tax measures.
The Korea Fair Trade Commission separately reviewed the combination because of potential competition effects in domestic low-density polyethylene and ethylene vinyl acetate markets, ultimately imposing conditions on the transaction.
A More Selective Approach to Circular Investment
For packaging companies, recyclers and other stakeholders seeking additional chemically recycled PET supply, the cancellation removes a significant potential source of new capacity from the South Korean market.
It also highlights the gap that can emerge between long-term circular economy strategies and near-term capital allocation. LOTTE Chemical announced ambitious plans in 2022 to develop recycled plastics, hydrogen, battery materials and other lower-carbon businesses. At the time, the company targeted more than 1 million metric tons of recycled and bioplastic products by 2030.
Four years later, weaker petrochemical economics and industry restructuring are forcing a more selective investment approach.
The Ulsan project demonstrates that demand for recycled materials alone does not guarantee that recycling capacity will be constructed. Projects also require competitive production costs, reliable waste feedstock, customers willing or required to purchase recycled material, and sufficient financial returns relative to other demands on corporate capital.
LOTTE Chemical's existing C-rPET infrastructure means the project could theoretically return if those conditions improve. For now, however, the company is prioritizing financial restructuring and higher-value businesses over completing one of South Korea's most ambitious planned PET depolymerization facilities.
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