Lotte Chemical has sold off all of its plants producing general-purpose petrochemicals in China. General-purpose petrochemicals have become a marginal business for the company with deteriorated profitability due to aggressive expansion by Chinese companies.
According to industry sources on Oct. 9, Lotte Chemical sold off its entire stake in Lotte Chemical Jiaxing, a local plant in Jiaxing, China, to a local partner in late September. This marked Lotte’s exit from basic petrochemicals production in China. Each company was sold for less than 100 billion won.
Lotte Chemical Jiaxing had been producing ethylene oxide adduct (EOA) and ethanolamine (ETA), which are raw materials for cement and detergents, but had been losing money for years as a downturn in China’s construction industry and the expansion of local companies pushed their prices below the break-even point.
Lotte Chemical decided to close all of its plants producing basic petrochemicals in China and shift its focus to producing more profitable high-value-added products. The company plans to focus on producing high-growth battery materials such as ABS, copper foil, and separators. It plans to increase the proportion of sales from high-value-added products to 60 percent by 2032, up from 47 percent in 2022. Last year the company sold high-value-added products and general-purpose products in a ratio of 47 to 53.
In 2021, Lotte Chemical sold high-value-added products in the United States (19 percent), Europe (14 percent), and East, West, and South Asia (15 percent). This year, the company aims to expand the proportion of its sales to the U.S. (20 percent), Europe (20 percent), and Asia-Pacific (18 percent), totaling 58 percent of its sales to these regions. The company’s main products include acrylonitrile butadiene styrene (ABS), polycarbonate (PC), and compounding used in information technology (IT) devices, automobiles, home appliances, and smartphones.
As for its existing general-purpose products, it will zero in on the fast-growing Southeast Asian market. Lotte Chemical will invest US$3.9 billion in Indonesia to complete a mega petrochemical complex in 2025. Last month, its progress reportedly topped 70 percent.
On the other hand, Lotte Chemical plans to reduce the share of its basic business sales in the Chinese market from 23 percent in 2020 to 17 percent this year and 15 percent in 2025. The company sold off the Lotte Chemical Jiaxing plant in September, following the sale of Lotte Samkang Chemical in June.