Lotte Chemical closes Yeosu plant amid industry crisis

South Korean petrochemical major Lotte Chemical has begun shutting down its ethylene glycol (EG) and methyl methacrylate (MMA) production facilities at its Yeosu Plant 2. The major move comes as the company grapples with ongoing losses and broader industry challenges.

The plants, once a major source of revenue for Lotte Chemical, and the decision to shut them reflects a severe downturn in the global petrochemical market. The industry has been plagued by oversupply, especially from China, which has aggressively expanded its production capacity in recent years. This has led to a drop in demand and prices for a variety of petrochemicals, including EG and MMA.

Lotte Chemical's decision to "box up" the facilities, meaning empty and seal the equipment, suggests the company may be looking to dismantle and sell them. The move highlights the severity of the situation and the company's efforts to streamline operations and reduce costs.

"We are preparing for the lockdown by reducing output at Lotte Chemical's EG and MMA production facilities at its Yeosu Plant 2," said an unnamed official at the Yeosu National Industrial Complex. "The shutdown of the plant takes time and the plant will be cleared quickly when the lockdown begins."

The challenges faced by Lotte Chemical are not isolated. Other major players in South Korea's petrochemical industry, such as LG Chem and Hanwha Solutions, are also grappling with similar issues. LG Chem has halted operations at its styrene monomer (SM) plant, while Hanwha Solutions is strengthening its financial position by issuing perpetual bonds.

In response to the crisis, the South Korean government is preparing a comprehensive support plan for the petrochemical industry, which is expected to include tax incentives and regulatory reforms. The aim is to enhance the competitiveness of the industry and promote consolidation among distressed companies.

Lotte Chemical's parent company, Lotte Group, has also undergone major organizational changes. The company replaced several executive positions, including several CEOs of its chemical division. The leadership reshuffle is aimed at injecting new perspectives and driving strategic transformation.

As the petrochemical industry continues to navigate turbulent times, Lotte Chemical’s decision to shut down key facilities highlights the need for innovative solutions and strategic realignment to ensure long-term sustainability.