[Click eStock] "Lotte Jeongmil Chemical Forecasts Record High Performance Since Establishment"

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities forecasted on the 8th that Lotte Fine Chemical will record its highest-ever performance in the second quarter of this year since its establishment.

Lotte Fine Chemical is expected to record an operating profit of 120.2 billion KRW in the second quarter of this year, a 123.1% increase compared to the same period last year. Dongwook Lee, a researcher at Kiwoom Securities, said, "In the chemical sector, the chlorine series continues to see strong prices and spreads for key products such as epichlorohydrin (ECH) and caustic soda," adding, "this is due to steady demand and the concentration of regular maintenance by competitors, and the ammonia series in the chemical sector is also maintaining strong prices due to reduced operating rates of offshore plants and increased demand from fertilizer and industrial sectors."

He added, "It is also necessary to consider that the company is relatively free from margin erosion caused by gas, oil, and coal prices due to its ammonia distribution business."

Performance improvement is also expected in the green materials sector. Although logistics costs remain a burden, the green materials sector benefits from a favorable exchange rate effect as its export ratio reaches 95%, and additional supply price increases were implemented in April this year following October last year. Due to the effect of expanding the food and pharmaceutical production line by about 2,000 tons in the first half of this year, the unit price in the green materials sector is expected to further improve in the second half of this year.

Caustic soda used in domestic cathode active material precursors is estimated to be only about 2-3% of the total domestic caustic soda demand, at around 40,000 tons as of last year.

However, with the internalization of precursors by domestic cathode active material companies, the demand for caustic soda for domestic precursors is expected to grow by more than 60% annually after this year, reaching 370,000 tons by 2026. This is because the production capacity of domestic companies such as POSCO Chemical Gwangyang, EcoPro GEE M Yeongilman, Korea Precursor (LG Chem/Korea Zinc JV) Ulsan, E&Di, Cosmo Advanced Materials, and L&F (JH Chemical) is expected to surge from 61,000 tons this year to 415,000 tons in 2026.

Researcher Lee said, "In the case of NCM cathode active materials, 0.95 tons of precursor is used per 1 ton of production, and when producing 1 ton of precursor, it is estimated that 0.89 tons of caustic soda (1.85 tons at 48% concentration) and 0.124 tons of ammonia water (0.3 tons at 20% concentration) are used based on 100% concentration." He added, "We are already supplying caustic soda to domestic cathode active material and precursor companies, and additional demand for caustic soda is expected to arise in the future from the collection and recycling process of spent batteries, which has high growth potential."