Asia Essentials - 02 Jul 2026

研报英文原文证据摘录

Asia Essentials - 02 Jul 2026

Flashnote

01 July 2026

Chemicals

Lotte Chemical (011170 KS, Not rated) Korea

Macquarie ETAC Oil Conference 2026

Kaushal

Ladha, CFA

What's new

We hosted the management of Lotte Chemical (not rated) at our Macquarie

ETAC Oil Conference. Focus is on restructuring, consolidation, feedstock

flexibility, and migration into higher-value materials.

Why it matters

• Lotte Chemical expects 2Q consolidated earnings to improve modestly

QoQ, helped by better product spreads after the Iran/Hormuz

disruption. But the tone turned cautious: product spreads weakened

sharply from late May/early June, and the company expects a negative

feedstock lag / inventory loss because oil prices stabilized around US$70/

bbl, below early-2Q procurement prices.

• Margins have rolled over fast. Management said the strong margin

environment lasted until early June. Since mid-June, naphtha-to-ethylene

(NP-E) spreads have compressed to US$100–150/t, below the usual US

$250–300/t breakeven range. They emphasized that PE-NP spreads can

look better, but NP-E is the cleaner indicator for overall chemical health.

• Hormuz disruption raised feedstock costs, but did not break supply.

Lotte normally sources roughly 50% domestic and 50% imported feedstock,

with more than half of imports previously from the Middle East. During the

disruption, it diversified procurement to Europe, the US and Africa, but paid

higher premiums. The problem is now less about availability and more about

whether production is profitable at higher feedstock costs.

• Operating rates are near minimum levels. Domestic Korean crackers at

Yeosu/Daesan are running in the low-70% range, slightly above minimum.

Overseas sites are also near minimum, except the US ethane cracker in