LG Chem stock faces renewed pressure from petrochemicals losses

LG Chem's petrochemicals business is expected to return to losses in the second half despite the restart of its No. 2 naphtha cracking center in Yeosu. The Korea Financial Times reported on October 22 that falling feedstock prices and higher logistics costs were weighing on the division.

The publication cited a third-quarter consensus forecast of KRW 14.7113 trillion in consolidated revenue and KRW 275.6 billion in operating profit. It also said improved earnings at battery subsidiary LG Energy Solution were expected to support the group result, while the petrochemicals division could post an operating loss of about KRW 300 billion in the second half.

Yeosu Restart Does Not End Restructuring

LG Chem resumed feedstock input at the Yeosu No. 2 facility on October 12, 203 days after operations stopped on March 23. The plant has annual ethylene production capacity of 800,000 tons, but higher output alone may not restore profitability if product spreads remain weak.

LG Chem is discussing a restructuring of its Yeosu naphtha-cracking business with GS Caltex. Options reportedly include transferring facilities to GS Caltex and operating them through a joint venture, although no final structure has been announced. The company aims to secure government approval within the year.

Battery Gains Cushion Chemicals Weakness

LG Energy Solution reported preliminary third-quarter operating profit of KRW 756 billion, compared with KRW 113.3 billion in the previous quarter. The Korea Financial Times attributed the improvement to compensation-related income from automakers and stronger energy-storage-system sales.

Advanced Materials is also expected to improve, with brokerages forecasting operating profit of KRW 50 billion in the third quarter and KRW 90 billion in the fourth quarter, up from KRW 20 billion in the second quarter. The outlook remains uneven because cathode materials are expected to make only a limited contribution.

LG Chem's Business Portfolio

LG Chem is headquartered in South Korea and operates across petrochemicals, advanced materials and life sciences. Its petrochemicals business spans products from basic materials such as ethylene and propylene to downstream products including polyethylene, ABS and synthetic rubber, while advanced materials focuses on battery and electronic materials.

The company also develops pharmaceutical products through its Life Sciences business. Its Yeosu discussions with GS Caltex place LG Chem among the Korean chemical producers adjusting capacity and costs as the petrochemicals market remains oversupplied.

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