South Korean petrochemical producers LG Chem and Hanwha Solutions see a gloomy fourth quarter outlook because of weak global demand, but LG Chem expects the market to gradually pick up from next year.
These expectations came after both firms reported lower petrochemical sales in the third quarter.
LG Chem's petrochemical sales were at 5.49 trillion South Korean won ($3.87bn) in the July-September quarter, down by 8.3pc from W5.99 trillion in April-June and by 2.4pc from W5.63 trillion in the year-earlier period. Its sales included petrochemical products such as acrylonitrile butadiene styrene and polyvinyl chloride (PVC), although the volumes are unclear.
The firm expects the "difficult situation to be continued due to sluggish global demand and increased supply", it said on 31 October.
LG Chem attributed the lower profitability for its petrochemical business to worsening spreads because of rising oil prices and falling global demand. The firm's petrochemical operating profit plunged to W93bn in July-September, down by 82pc from W513bn the previous quarter and by 91.4pc from W1.09 trillion a year earlier.
LG Chem's 1.15mn t/yr Yeosu cracker is currently undergoing a turnaround that started on 23 September and will end in December. It will also conduct a maintenance at its No.2 Yeosu-based naphtha cracker during April-June 2023.
Hanwha Solutions recorded a similar drop in its third-quarter petrochemical sales, which totalled W1.47 trillion, down by 8.1pc from W1.6 trillion in April-June. But sales were up by 12.2pc from W1.31 trillion during July-September 2021. Its sales included chlor-alkali products, PVC, toluene diisocyanate (TDI), low-density polyethylene (LDPE), linear LDPE, and ethylene vinyl acetate copolymer.
Hanwha Solutions expects the LDPE market to remain bearish in the second half of this year because of recession-related slow demand and higher global supplies resulting from additional capacity. The PVC market is also forecast to be weak on sluggish demand owing to a global economic downturn. But the firm sees strong global caustic soda prices because of price hikes in major countries resulting from rising energy costs. The company also expects the TDI market to be supported by a supply shortage and regular maintenance at global TDI producers.
The producer's operating profit also plunged to W120bn during July-September, down by 48pc from W228bn in April-June. Hanwha Solutions attributed this drop to narrowing spreads resulting from weaker demand during a global recession. The firm also sees fourth-quarter operating profit falling further because of regular maintenance and the off season towards the end of the year, with global recession to continue weighing on demand.
