LG Chem contemplates naphtha cracking facility sale

LG Chem is considering selling off its naphtha cracking facility amid weak demand for petrochemical products, according to local media reports.

LG Chem's Yeosu Naphtha Cracking Center facility in South Jeolla [LG CHEM]

LG Chem is considering selling off its naphtha cracking facility amid weak demand for petrochemical products, according to local media reports.

The chemical company said that “nothing has been decided yet,” in a regulatory filing posted Monday.

Local media outlets reported that LG Chem is reviewing the sale of one of its two naphtha cracking facilities in Yeosu, South Jeolla, named Yeosu Naphtha Cracking Center (NCC).

Naphtha, derived from crude oil, is a key material for plastics and rubber. At the 330,000-square-meter (82-acre) Yeosu NCC Complex 2, LG Chem has been producing ethylene and propylene, yet halted the operation of the plant after a maintenance break in April.

The facility, which completed expansion in 2021, has an annual ethylene production capacity of 800,000 tons and a propylene capacity of 480,000 tons.

Following the reports, LG Chem said on Monday that the company is “considering various measures to improve its competitiveness in petrochemicals and ramp up business value, yet nothing has been decided yet.”

LG Chem’s chemical segment posted an operating loss of 50.8 billion won ($38.8 million) in the first quarter this year, staying in the red for the second consecutive quarter after reporting an operating loss of 165.9 billion won in the Oct.-Dec. period last year.

The weak performance was driven by high fuel prices, supply glut and weak demand, particularly in China, which is the biggest importer of local petrochemical products.

LG Chem’s head of petrochemical business, Roh Kuk-rae, has previously signaled a slimdown in an internal letter sent to the company’s employees in June, saying that “we cannot delay the restructuring of some of the businesses lacking competitiveness.”

Roh said that the company will “restructure the business through the shutdown of facilities, business exits, and equity sales, and redeploy personnel.”

LG Chem's share price climbed 3.6 percent on Monday in the main Kospi bourse, closing at 691,000 won.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]