Lotte Chemical sells off debt-ridden JV to China's Sanjiang

South Korea’s Lotte Chemical Corp. has divested all shares it owns in Chinese joint venture Lotte Sanjiang Chemical Co., according to people familiar with the matter on Wednesday.

The Korean petrochemical company has sold the non-core asset to its Chinese partner Sanjiang Chemical Co., sources said. The two firms established the 50:50 JV with an injection of 180 billion won ($134.8 million) in 2010. 

Lotte Chemical didn’t disclose the deal size. The Korean company has sold the shares for far less than the amount it invested as the Chinese JV has impaired capital, sources said.

Based in Jiaxing, Zhejiang Province, the JV set up a local plant to produce ethylene oxide, a key material for the synthesis of ethylene glycol that is used for production of polyester, polyethylene terephthalate (PET) and liquid coolants.

The JV also established another factory to use its ethylene oxide and manufacture ethanolamine in the same year. Ethanolamine is a key ingredient for making surfactants and pharmaceuticals and is an agent for softening leather.

The JV has seen its ethylene dioxide prices plunge for years with the aggression expansion of Chinese chemical firms' manufacturing facilities. Lotte Sanjiang Chemical posted 18.3 billion won and 37.5 billion won losses in 2021 and 2022, respectively. The ethanolamine plant has also suffered a shortfall, sources said.

Lotte Chemical has forecast the markets of the chemicals won’t rebound as its competitors will increase supply in China’s economic recovery. The company has decided to sell off the JV and spur businesses in high value-added industries.

The Korean chemical firm is accelerating the divestment of some of its overseas affiliates, including a Pakistani unit for purified terephthalic acid production for $155.8 million in January of this year. The company closed its Poland-based sales entity in May and transferred the role to its German affiliate.

Write to Hyung-Kyu Kim at khk@hankyung.com

Jihyun Kim edited this article.