South Korea’s LG Chem to cut cracker rates

South Korea's LG Chem plans to reduce operating rates at its 1.27mn t/yr Daesan cracker by 5pc to 95pc from January because of squeezed production margins.

The company will monitor market sentiment and production margins before deciding on any further cuts for February.

LG Chem will become the second South Korea-based cracker to cut production after SK Global Chemical, which has reduced utilisation rates at its 160,000 t/yr unit since October.

Other South Korean petrochemical crackers including Lotte Chemical, YNCC and Hanwha Total are also considering cutting rates because of narrowing margins.

Petrochemical cracker operators in southeast Asia have also announced cuts to utilisation rates. Two Thai producers — Siam Cement's (SCG) 900,000 t/yr Mab Ta Phut Olefins cracker and Rayong Olefins' 800,000 t/yr cracker — will cut rates by 10pc in January.

Petrochemical production margins have been hit by rising prices of feedstock naphtha, which have increased to $560/t from $500/t cfr Japan in October. But ethylene prices have fallen from $800/t cfr northeast Asia just under a month ago to $700/t cfr this week. This puts the naphtha-ethylene spread at $140/t, below the typical level of at least $200/t that producers need to cover costs.

By Toong Shien Lee

source: Argus Media