[Exclusive] Lotte Halts Third VAM Plant Expansion... High-Value Petrochemical Strategy in Jeopardy

The Only Domestic Producer Halts Expansion Plans
Possible Output Cuts Amid Construction Slump and Chinese Capacity Increase
Joint Venture: 51% INEOS (UK), 49% Lotte Fine Chemical

Lotte INEOS Chemical, the only domestic producer of vinyl acetate monomer (VAM), has indefinitely postponed its planned plant expansion. The company is even considering reducing production at its existing facilities. As profitability in the fine chemicals sector has deteriorated due to weakening global demand and falling prices, there is growing analysis that restructuring in the petrochemical industry is spreading from basic feedstocks such as ethylene and propylene to high-value-added application materials.

According to industry sources on July 23, Lotte INEOS Chemical recently put on hold its plan to build a third VAM plant with an annual capacity of 300,000 tons at its Ulsan site. All new hiring and equipment orders related to the expansion have been completely suspended. A company representative declined to comment further, stating, "It is difficult to provide an official position regarding the expansion plans."

Exterior view of Lotte INEOS Chemical vinyl acetate plant. Photo by Asia Economy DB

VAM is an intermediate petrochemical material used in a wide range of everyday products, including ethylene vinyl acetate (EVA) film for solar panels, wire coatings, adhesives, and latex.

Lotte INEOS Chemical decided to indefinitely delay its plant expansion due to a decline in demand caused by the global construction downturn, as well as significant supply volumes from China. An industry insider explained, "When the expansion was decided in 2023, it was expected that demand would increase after the COVID-19 pandemic. However, the economy instead entered a downturn, and China also increased its production capacity, which weakened our competitiveness."

In addition to postponing the expansion, the company is considering reducing output at its currently operating first and second plants, which have a combined annual capacity of 480,000 tons.

Lotte INEOS Chemical's decision to abandon its expansion plans is being interpreted as a sign that the deterioration of the petrochemical industry is spreading across the board. The company produces acetic acid using methanol and carbon monoxide, and VAM using acetic acid and ethylene as raw materials. While methanol is imported mainly from China and the Middle East, ethylene is reportedly supplied by companies such as Korea Petrochemical Ind. near the Onsan complex. If demand for ethylene decreases, naphtha cracking center (NCC) operators will also have to seek alternative customers or adjust their operating rates.

Lotte INEOS Chemical is a joint venture between the UK-based INEOS (51%) and Lotte Fine Chemical (49%). The company originated as Samsung BP Chemical, jointly established by Samsung and the UK's BP in 1989. It became part of the Lotte Group in 2016, and its current structure was formed in 2021 when INEOS acquired BP's stake. As of last year, Lotte INEOS Chemical reported sales of 845.8 billion won and operating profit of 54 billion won. A company representative commented, "This is an unresolved internal matter and a sensitive issue for our overseas headquarters as well."

The Ministry of Trade, Industry and Energy plans to announce restructuring and reorganization measures for the petrochemical industry in the second half of this year. While discussions are currently focused on basic feedstocks such as NCC, there is growing expectation that the scope of policy discussions will expand, given that actual production adjustments are now taking place in fine material sectors such as VAM.