Lotte Chemical sees petrochemical market 'stable to firm' up to 2020

South Korea’s Lotte Chemical Corp. sees the global petrochemical market remaining ‘stable to firm’ out to 2020 thanks to low oil prices, but its chief executive wants to diversify the company’s feedstock to help it cut costs.

South Korea’s second-biggest petrochemicals maker has benefited from low oil prices as its main feedstock, naphtha, is derived from crude oil, which has a bigger influence on its business than supply and demand, Lotte Chemical Chief Executive Officer Kim Gyo-hyun said at the Reuters Global Commodities Summit.

“By 2020, petrochemical markets are likely to be stable to firm as oil prices are expected to remain stable at $60,” Kim said in his first interview since starting as CEO in March.

“Given that, the profitability of petrochemical makers with naphtha crackers, like us, is likely to change little.”

The petrochemical maker is on track to increase its global ethylene capacity by 40% to 4.5 MMtpy by the end of 2018, expanding its Yeosu plant in South Korea and building an ethane cracker with Axiall in Louisiana.

The plant in Louisiana will help it diversify away from mainly naphtha as a feedstock at its plants.

“Of the expected total capacity of 4.5 MMt, if we make 1.5 MMt with ethane crackers, it will help us diversify 30% of our raw materials to ethane or liquefied petroleum gas,” the chief executive said.

“By doing so, we can make stable profits and become a sustainable petrochemical company even if oil prices rise to $100.”

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