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Facility Expansion by Chinese Companies Compels Lotte Chemical to Halt Facilities in Korea
PTA Facilities Halted Indefinitely
Facility Expansion by Chinese Companies Compels Lotte Chemical to Halt Facilities in Korea
  • By Michael Herh
  • April 1, 2020, 13:35
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A view of Lotte Chemical’s Plant in Ulsan, South Korea

Following SK Global Chemical, Lotte Chemical is also shutting down some of its plants in Ulsan due to a supply glut caused by Chinese companies.

Lotte Chemical will suspend purified terephthalic acid (PTA) facilities in its Ulsan plant indefinitely. The company has also lowered the utilization rate of some of its paraxylene (PX) facilities.

The move was prompted by the recent large-scale expansion of PTA facilities by Chinese companies. China's PTA production capacity will increase by 18.8 million tons between the fourth quarter of 2019 and this year. As a result, the PTA price fell from US$792 per ton in the second quarter of 2019 to US$619 per ton in December 2019 and is expected to drop to US$488 per ton in March.

China is also expanding production facilities for PX, the raw material for PTA. Korea Development Bank says that China expanded its PX production capacity by 17.7 million tons in 2019 and will further increase it by 5.9 million tons in 2020. China's total PX production capacity is expected to reach 30 million tons in 2020. Korean petrochemical companies export 91 percent of their PX output to China, so the capacity expansion in China will hit them hard.

Chemical industry observers say that Lotte Chemical had coped with oversupply by converting PTA facilities to high-purity isophthalic acid (PIA) facilities, but this approach has reached its limits. In particular, a big explosion at Lotte Chemical's Daesan Plant earlier this month also has affected it.

Amid a global economic downturn and the COVID-19 crisis, Korean petrochemical companies are starting to restructure their operations. SK Global Chemical has decided to shut down its naphtha cracking center (NCC) at the SK Ulsan Complex beginning December, and its ethylene propylene diene monomer rubber (EPDM) production process within the second quarter.