"Specialty Essential to Counter China"... Four Petrochemical Companies Increase R&D Investment

Focusing on Specialty Products Amid the Influx of Low-Cost Chinese Goods
"Results Won't Come in Just 1-2 Years... A Long-Term Perspective Is Needed"

LG Chem, Lotte Chemical, Hanwha Solutions, and Kumho Petrochemical, known as the domestic 'Big 4 petrochemical companies,' increased their research and development (R&D) investments last year. This is interpreted as a strategy to secure future growth engines while responding to the oversupply of Chinese products with high value-added products.

According to the business reports disclosed on the Financial Supervisory Service's electronic disclosure system on the 19th, all these companies increased or maintained their R&D expenses despite a decrease in operating profits or an expansion of operating losses.

In particular, Lotte Chemical recorded the largest operating loss of 894.1 billion KRW on a consolidated basis last year, but its R&D expenditure growth rate was the highest at 23%. It expanded from about 120.3 billion KRW in 2023 to about 148.1 billion KRW in 2024. The company explained that these funds were used to develop battery new materials and hydrogen technologies. A Lotte Chemical official said, “It is difficult to compete with China in conventional general-purpose products,” adding, “We will actively conduct research and development in the specialty sector.”

LG Chem, the top domestic company in terms of sales, invested 2.19 trillion KRW in R&D last year, an increase of 4.8% from 2.085 trillion KRW the previous year. LG Chem’s operating profit last year (916 billion KRW) sharply declined by 63.8% compared to the 2 trillion KRW level in 2023. The company stated that it will strengthen research and development in advanced materials for displays and the bio sector, including new drugs.

Hanwha Solutions posted an operating loss of 121.3 billion KRW in the chemical division last year, turning to a deficit, but maintained a similar level of R&D spending at 213.7 billion KRW compared to 214.9 billion KRW the previous year. The company mainly invested its R&D expenses in developing specialty isocyanates used as raw materials for adhesives and other products.

Kumho Petrochemical increased its R&D expenditure by 3.6% from 63 billion KRW the previous year to 65.3 billion KRW. In particular, it increased investments in high value-added synthetic rubber, electric vehicle materials, and eco-friendly product development. Kumho Petrochemical’s operating profit last year was 272.8 billion KRW, down 24% from the previous year.

Professor Bae Jin-young of the Department of Chemical Engineering at Sungkyunkwan University said, “To advance in specialty products that China cannot catch up with, R&D expenses are inevitable,” adding, “In the future, a transition to high value-added products in eco-friendly and bio sectors should also be pursued.” An industry insider explained, “Unlike other fields, chemical industry results do not appear within one or two years, so investments are being made from a long-term perspective.”