Naphtha Prices Soaring

Lotte Chemical's plant in Yeosu on the southern coast

South Korean chemical companies’ business performances are likely to deteriorate this year due to the war in Ukraine.

According to FnGuide, Lotte Chemical’s operating profit for the first quarter of this year is estimated at 116.3 billion won, down 81 percent from a year ago. In addition, LG Chem’s is estimated to fall from 1.4 trillion won to 836 billion won and those of Kumho Petrochemical and Hanwha Solutions are estimated to fall 33 percent and 45 percent to 410 billion won and 141 billion won, respectively.

Their concerns are rising along with the prices of oil and naphtha, a crude oil byproduct forming the foundation of their business. In the first week of this month, the international price of naphtha was US$888, up 60 percent from a year earlier. The price was US$740 in early January this year. At present, demands for petrochemical products are falling, although the rise in international oil price is slowing down at around US$1,000 per barrel.

Those companies are trying to make a breakthrough with new technologies in new fields. For example, Lotte Chemical recently announced that it would invest at least 11 trillion won until 2030 in the fields of hydrogen, battery materials, bioplastics and resource recycling. LG Chem is increasing its investment in battery materials, sustainable solutions and pharmaceuticals and Hanwha Solutions is focusing on eco-friendly energy generation.

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