South Korean petrochemical firms' profits plunge in 2024 as oversupply persists

LG Chem

07/02/2025 11:06

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      Lotte Chem 2024 operating losses deepen 157% year-on-year
    

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      LG Chem 2024 operating profit down 63.75%
    

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      Oversupply, Trump 2.0 create demand uncertainty in 2025
    

  
    By Michele Pek and Gabrielle Ng
       Singapore, Feb 7 (Reuters) - South Korean petrochemical
companies LG Chem and Lotte Chemical both made losses in 2024,
dragged down by oversupply which is set to persist this year,
while trade turmoil has dampened the global economic outlook,
company executives said this week.
    Petrochemical producers in Europe and Asia have been
consolidating, as years of capacity build-up in top market China
and high energy costs in Europe have squeezed margins.
    Lotte Chemical  011170.KS , which reported results on
Friday, showed that its 2024 operating losses deepened by some
157% year-on-year to 895 billion won ($619.62 million). This
marked its biggest loss in operating income since 2011, the
company's data showed. Financial data from before 2011 was not
publicly available.
    The company's basic materials division, which includes
petrochemicals, cut its operating loss by roughly 52% in the
fourth quarter from the previous quarter to 175 billion won.
    LG Chem  051910.KS , which reported earnings on Monday,
showed that 2024 operating profits fell 63.75% from the previous
year to 916.8 billion won, the lowest since 2019.
    Its petrochemical division posted a fourth-quarter operating
loss of 99 billion won.
    Both companies cited a global glut as a key problem in the
petrochemicals industry.
    "The continued market downturn was driven by an oversupply
in Northeast Asia from continued capacity expansion and China's
sluggish economic recovery," Yang Cheol Ho, head of strategy for
LG Chem’s petrochemical division, said on a call on Monday.
    Oversupply is expected to persist for years with new plants
still coming online in the Middle East and China.
    "We do expect continued overcapacity and uncertainties in
global demand, especially under Trump 2.0," a senior Lotte
Chemical executive said on Friday.
     U.S. President Donald Trump has imposed 10% tariffs on all
Chinese imports, prompting retaliatory duties from China.
    Both companies, while noting recovery in Chinese demand was
slow, were largely optimistic about demand recovery in the
sector's biggest consumer.
    "There are very strong measures being taken to try to
stimulate consumption," an LG Chem company spokesperson said,
adding that this could lead to a gradual recovery in domestic
demand in China for home appliances.
    A Lotte Chemical spokesperson said they are waiting for
further announcements from Beijing on its stimulus plans in
March.
    Beijing in January added more home appliances to the list of
products in its consumer trade-in scheme in an effort to revive
its struggling consumer sector. 
    The stimulus scheme boosted last year's consumption growth
by more than 1 percentage point, according to the country's
commerce ministry.
    LG Chem is targeting revenues of 26.5 trillion won in 2025
and is likely to maintain its capital expenditure at close to 2
trillion won. It cut its capex last year by around 30% from
2023. 

($1 = 1,444.4300 won)

 (Reporting by Michele Pek and Gabrielle Ng; Editing by Florence
Tan and Jane Merriman)
 ((michele.pek@thomsonreuters.com;
gabrielle.ng@thomsonreuters.com))