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Lotte Chemical Halts Operation of 9 Plants after Explosion at Daesan Complex
Accident May Halt Decline in Ethylene Prices
Lotte Chemical Halts Operation of 9 Plants after Explosion at Daesan Complex
  • By Michael Herh
  • March 5, 2020, 11:44
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A column of fire billows up after an explosion at Lotte Chemical's Daesan Complex in Seosan, South Chungcheong Province, at 2:59 am on March 4.

Lotte Chemical has suspended the operation of nine plants following an explosion at its Daesan Complex in Daesan-eup, Seosan County, South Chungcheong Province, on March 4.

“Around 3 a.m. in the morning, an explosion occurred at the naphtha cracking center (NCC) at Daesan Plant in Seosan,” Lotte Chemical said in a statement. “We have shut down the operation of nine plants.” The suspended plants included benzene toluene xylene (BTX), butadiene (BD), ethylene glycol (EG) 1, polyethylene (PE) 1, polyfluoropropylene (PP) 1 and PP 2 plants.

The accident is expected to have an impact on the ethylene market. Lotte Chemical produces 4.5 million tons of ethylene annually at home and abroad. Daesan Plant accounts for 1.1 million tons, about 24.4 percent of the total ethylene output. Securities firms believe that Daesan Plant accounts for 0.6 percent of the global ethylene market and 2.3 percent of the Northeast Asian ethylene market.

Lotte Chemical is not sure of when it will be able to resume the operation of the suspended plants. Some observers believe that replacement and repair work can be completed within one month, while others expect that it will take more than six months for the company to resume a normal operation.

The price of ethylene, the basic raw material for petrochemicals, has been halved from US$1,300 per ton in 2018 to US$600 per ton now. The ethylene-naphtha spread, which refers to ethylene prices minus naphtha prices, stood at US$158 in the first quarter, falling short of the break-even point (BEP) of US$250 to US$300.

“Amid the U.S.-China trade dispute and negative effects from COVID-19 infections, most Asian NCC companies have recently cut production volume,” said an industry insider. “Although the suspension of the operation of Daesan Plant will not reverse the slumping market, it may put a halt to the decline in ethylene prices.”