Soaring Chemical 4 Companies, Will Quarterly Operating Profit Surpass 2 Trillion Won?

LG Chem, First Ever Quarterly Operating Profit of 1 Trillion Won
Lotte Chemical, Increased Sales of All Basic Materials
Kumho Petrochemical, Record High Performance Expected Due to Surge in NB Latex Demand
Hanwha Solutions, Chemical Division Drives Performance
Surge in Chemical Product Demand, Global Supply Tightness Benefits Domestic Chemical Companies

Photo by LG Chem

[Asia Economy Reporter Hwang Yoon-joo] Attention is focused on whether four domestic chemical companies?LG Chem, Lotte Chemical, Kumho Petrochemical, and Hanwha Solutions?will surpass 2 trillion won in operating profit in the first quarter of this year. With the global economic recovery mood after COVID-19 significantly increasing demand for chemical products, there is growing anticipation that the domestic chemical industry will deliver surprising results.

According to the industry on the 27th, the earnings announcements of the four domestic chemical companies will be made in the following order: LG Chem starting on the 28th, Kumho Petrochemical (first week of May), Lotte Chemical (May 7), and Hanwha Solutions (mid-May).

According to earnings estimates from FnGuide, the combined operating profit of the four chemical companies?LG Chem, Lotte Chemical, Kumho Petrochemical, and Hanwha Solutions?is estimated at 2.1514 trillion won for the first quarter on a consolidated basis.

First, LG Chem is estimated by the securities industry to have an operating profit of 995.5 billion won, but some expect that it could record over 1 trillion won in quarterly operating profit for the first time since its founding. This is due to increased demand for LG Chem’s core products, high value-added synthetic resin (ABS) and polyvinyl chloride (PVC). ABS products account for about 25% of LG Chem’s operating profit.

Kumho Petrochemical is also expected to record operating profit in the 400 billion won range for the first quarter this year, thanks to a surge in demand for its main product, NB latex, after COVID-19. Kumho Petrochemical is the industry leader with a 30% global market share of NB latex.

Lotte Chemical is projected to record 481.5 billion won due to increased demand for plastic products, and Hanwha Solutions is also expected to achieve a record high of 229.1 billion won, driven by its chemical division’s performance.

The rising expectations for the chemical industry’s earnings are due to a supply situation that is tight compared to demand. Last year, China planned to expand ethylene production but postponed it due to the impact of COVID-19, and North American ethylene supply was disrupted by a cold wave in the U.S. Meanwhile, from the second half of last year, demand for chemical products such as automotive (ABS), home appliances (ABS), plastics (PP, PE), and construction (PVC) surged, leading to an increase in product selling prices relative to raw material prices. For example, the average price of ABS in the first quarter surpassed $2,000, nearly double the previous quarter, and the average price of NB latex in the first quarter rose 23.4% from the previous quarter to $1,949. As product prices soared and global competitors’ supply capacity weakened, domestic chemical companies benefited.

An industry official said, "With global supply tight and chemical product demand increasing, the first quarter results of the chemical industry all exceeded expectations. However, in the second half, product prices that surged due to China’s expansion issues are expected to stabilize somewhat, showing a 'high in the first half, low in the second half' trend."