Lotte Chemical Selected as Global Key Base in the US

[Asia Economy Reporter Park So-yeon] Lotte Chemical is focusing its investments on advanced facility upgrades with a strategy to develop its U.S. production base into a global core hub. In addition to the ethylene production line for basic chemical products currently operating in the U.S., the company plans to establish a full lineup of high value-added polymer products to leap forward as a global chemical company.

According to industry sources on the 5th, Lotte Chemical has set an internal policy to build an advanced polymer product production lineup similar to that in Korea, not specialty (functional) products for local U.S. sales, on the available land at its Lake Charles plant in Louisiana. This is interpreted as meaning that the company intends to directly produce global general-purpose chemical products in the U.S. and export them, rather than producing products solely for local sales. To this end, Lotte Chemical plans to add production lines for high value-added polymer products such as polyethylene, polypropylene, olefins, and polycarbonate on the available land at the Lake Charles plant.

With shale gas as the raw material for ethylene production, the differentiated cost structure of this plant and the increase in sales prices within the U.S. have expanded profitability, enabling Lotte Chemical’s U.S. subsidiary, LC USA, to record higher operating profit margins than in Korea. Based on this, Lotte Chemical plans to place more emphasis on its U.S. production base rather than China or Southeast Asia and aims to raise the overseas production ratio to 50% in the future.

A Lotte Chemical official said, "Because the raw material cost itself is different in the U.S. business, even in the current unfavorable market conditions, we are achieving operating profits of about 20-30%. We are planning to expand the plant to include polymer products and also increase the production capacity of the existing ethylene plant," he hinted.

Lotte Chemical will determine the specific timing after comprehensively reviewing demand forecasts, construction investment costs, and return on invested capital. Previously, it planned to proceed by comprehensively analyzing feasibility studies by plant construction companies such as Samsung Engineering and market forecasts from external institutions.

An industry insider said, "Although feasibility studies and market condition analyses must precede, if Lotte Chemical localizes polymer production in the U.S. by diversifying production bases and sales channels using shale gas as raw material to secure price competitiveness, it will be able to secure a favorable position in the global market in the mid to long term."

Meanwhile, Lotte Chemical signed a basic contract for an ethane cracker joint venture in February 2014 and, after about three years of construction starting in June 2016, completed a large-scale complex in Lake Charles, Louisiana, in 2019, covering an area equivalent to 152 soccer fields (approximately 1.02 million ㎡, about 310,000 pyeong). It is the first Korean chemical company to do so, producing 1 million tons of ethylene annually. With facilities capable of producing 4.5 million tons of ethylene annually domestically and internationally, Lotte Chemical has risen to become the number one ethylene producer in Korea and the seventh largest globally.