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View of Lotte Chemical's Daesan factory. (Photo=Lotte Chemical) |
[Alpha Biz= Reporter Kim Jisun] The downturn in the performance of South Korea's chemical companies continues to deepen, with no signs of improvement as the oversupply from China persists. Earlier forecasts suggesting a rebound in the second half of the year are losing traction.
According to financial information provider FnGuide on October 6, the combined operating profit estimates (on a consolidated basis) for six major domestic chemical companies—LG Chem, Lotte Chemical, Hanwha Solutions, Kumho Petrochemical, Hyosung TNC, and Hyosung Advanced Materials—are now projected to be 759.7 billion won for the third quarter. This represents a significant drop from the 1.65 trillion won forecast six months ago, indicating that actual market conditions were worse than initially expected.
The market's expectations for companies heavily reliant on basic chemicals, such as LG Chem and Lotte Chemical, have been particularly downgraded. Six months ago, LG Chem was expected to post an operating profit of 1.08 trillion won for the third quarter, but this has now been revised down to 601.5 billion won. Similarly, Lotte Chemical was initially forecast to break out of its loss streak with a profit of 122.1 billion won, but current estimates now predict a loss of 81.7 billion won.
Specialty product manufacturers have not been spared either. HS Hyosung Advanced Materials, which specializes in tire cords and carbon fiber, saw its third-quarter operating profit estimate drop from 75.7 billion won in early July to 67.6 billion won. This decline is attributed to worsening market conditions for tire cords and falling carbon fiber prices due to increased low-cost supply from China. Additionally, the planned expansion of carbon fiber production at its Jeonju plant has been delayed beyond the originally anticipated third quarter.
The ongoing challenges stem from a lack of global demand for chemical products and the significant increase in China's self-sufficiency in basic chemicals. Industry sources report that the NCC spread (the price difference between raw materials and products), a key indicator of petrochemical market health, remains below the breakeven point (BEP). During the first half of this year, the operational rates of the “Big Four” chemical companies hovered around 70-80%, the minimum threshold for profitability.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
