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Lotte Chemical to double LPG use as petchem makers diversify feedstock

Lotte Chemical plans to double LPG use for ethylene production by next year as the domestic industry rushed to diversify feedstock

By Jul 06, 2021 (Gmt+09:00)

Lotte Chemical Yeosu complex in the South Jeolla Province, South Korea
Lotte Chemical Yeosu complex in the South Jeolla Province, South Korea

South Korean Lotte Chemical Corp. plans to double liquefied petroleum gas (LPG) use for ethylene production by next year as the domestic industry rushed to diversify feedstock for cost cutting amid expectations of lower naphtha supply from local refineries, which aim petrochemical markets.

Lotte said on July 5 that it will invest 140 billion won ($123.6 million) in facilities to raise LPG cracking at the expense of naphtha. It is set to ramp up the gas usage for ethylene output at local plants to 40% by the end of 2022 from the current 20%. Ethylene is a basic material used in various fields, including plastics and petrochemical products.

“After 2023, we will use more LPG than naphtha as the ratio will exceed 50%,” a company official said.

Lotte operates ethylene plants in Yeosu and Daesan, South Korea, with a combined local annual capacity of 2.3 million tons, as well as overseas crackers in the US and Malaysia. In total, its ethylene capacity is 4.5 million tons a year.

LG Chem, Hanwha Total Petrochemical raise LPG use

South Korean petrochemical producers have been leading moves in Northeast Asia to diversify feedstocks. LG Chem Ltd., which can produce 3.3 million tons of ethylene per year, added LPG crackers in Yeosu plant in 2018 and Daesan in 2019. Some facilities in its Yeosu complex, which was recently built, can intake up to 50% of LPG. LG Chem currently uses only 20% of the gas as feedstock.

Hanwha Total Petrochemical Co. raised ethylene capacity of its Daesan complex by 150,000 tons with a new side cracker in May, which uses propane.

Those move came as LPG prices are usually cheaper than naphtha. The gas prices were around 90% of naphtha in 2018 and 87% in 2019. Last year, its values were around 103% due to cold weather and strong household demand for cooking and heating in India and Indonesia amid the COVID-19 lockdowns, but the strength was seen temporary. Petrochemical producers usually find it economical to crack LPG when the price ratio is lower than 90%, industry sources said.

Naphtha prices surged this year, tracking strong crude oil. The feedstock rose 53.6% to $681 per ton in the first week of July from a month earlier. In the recent six months, naphtha prices surged 194.1% and are expected to grow further with crude predicted to gain more, according to the industry.

Refiners eye petrochemical markets

In addition, refiners in South Korea are making inroads into the petrochemical business, which will cut naphtha supply to domestic producers.

GS Caltex refinery in Yeosu
GS Caltex refinery in Yeosu

GS Caltex, for example, is conducting a test run of its mixed feed cracker with an ethylene capacity of 750,000 tons a year, according to media reports.

S-Oil Corp. also plans a petrochemical project, which includes a steam cracker with an ethylene capacity of 1.8 million tons to be completed in 2026.

“Refiners are using naphtha for their own chemical production instead of selling it to others,” said a petrochemical industry official.

Refiners are expected to rush to the business as demand of gasoline and diesel is predicted to decline on eco-friendly cars, while jet fuel consumption remained sluggish due to the COVID-19.

Write to Jae-Kwang Ahn at

Jongwoo Cheon edited this article.
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