LG Chemical cuts SM output amid weaker demand

South Korea's LG Chemical has slashed operating rates at its 170,000 t/yr Daesan-based styrene monomer (SM) unit by 30pc since last week because of weaker demand and persistently negative production margins.

LG Chemical's SM feeds its derivative acrylonitrile butadiene styrene (ABS) units in South Korea and China. Operating rates at its South Korean ABS plant were reduced slightly but those at its ABS plants in China were slashed to 40pc, cutting LG Chemical's SM demand.

The company expects to maintain operating rates at its Daesan unit at 70pc until the end of March. Its next decision will be whether to maintain output at a reduced rate or lift production, depending on the coronavirus situation and SM demand. The outbreak has spread to South Korea with derivative and SM operating rates sliding.

LG Chemical also manages a 500,000 t/yr unit in Yosu that is operating normally.

Derivative operating rates have been low and consumers have been struggling to increase production after the lunar new year break because of the coronavirus outbreak in China, which has created logistics bottlenecks, a build-up of inventories and a lack of manpower. ABS from Taiwan destined for China has been diverted to Hong Kong. China and Hong Kong are now lacking storage space for these derivative products.

Taiwanese SM producers have added, brought forward and extended maintenance at their units to cope with weaker demand as derivative operating rates in Taiwan have been slashed as well.

By Kate Lee