The expectation for a rebound in LOTTE Chemical's performance, which faced a severe crisis last year that shook the group, is growing. There are prospects that supply and demand for crude oil will improve once the Russia-Ukraine war ends, and demand for petrochemical products will increase as China takes steps to stimulate domestic consumption.
On the 20th, LOTTE Chemical closed at 70,500 won, up 2.3% from the previous day in the Korea Exchange. The stock price, which was 53,400 won on the 12th, rose by 32% over six trading days.
The reason for the growing expectation of a rebound in LOTTE Chemical's performance is the prospect that the Russia-Ukraine war, which has dragged on for three years, will soon come to an end. U.S. President Donald Trump is reportedly accelerating peace negotiations by engaging in dialogue with Russian President Vladimir Putin. Considering that President Trump views President Putin as a negotiation partner, there are expectations that western economic sanctions against Russia will also be lifted after the peace agreement.
If Russian crude oil and petroleum products are re-supplied to the global market, the burden of sourcing raw materials for domestic petrochemical companies is likely to decrease. According to the Korea Petroleum Association (KPA), before the war in 2021, South Korea imported 5.4% of its total crude oil from Russia and 24% of naphta, a raw material for petrochemicals, from there.
Conversely, China, which had been receiving crude oil and petroleum products from Russia at low prices, will likely find it difficult to benefit any longer. The reason LOTTE Chemical experienced poor performance for several years was due to China's low-cost supply assault.
There are also forecasts that demand for petrochemical products will gradually increase. Once the war ends, reconstruction projects in Ukraine will begin, potentially increasing demand for LOTTE Chemical's main products, such as ethylene and synthetic resins. However, if President Trump excessively reflects Russia's position in the peace negotiations, Ukraine may retaliate, raising the likelihood that the war will not end quickly.
The petrochemical industry views the recent announcement by the Chinese government of the domestic stimulus policy 'Yiguhuanxin' (以舊換新·replacing the old with the new) as a positive development. Yiguhuanxin is a policy that provides incentives for replacing used vehicles, electronics, furniture, and daily necessities with new ones.
LOTTE Chemical sold all of its 75% equity stake in its subsidiary LCPL (LOTTE Chemical Pakistan Limited) to a private equity fund on the 19th. LOTTE Chemical plans to improve its financial structure and increase investments in the development of specialty (high value-added) products.