A panoramic view of Lotte Chemical’s Yeosu plant. (Lotte Chemical)

<이미지를 클릭하시면 크게 보실 수 있습니다>

Lotte Chemical Corp. has reportedly initiated the shutdown process for its ethylene glycol (EG) and methyl methacrylate (MMA) production facilities at Yeosu Plant 2 in southern South Korea.

According to industry sources on Thursday, Lotte Chemical has begun reducing production and preparing for “box-up” at the plant. Box-up, which involves emptying production equipment and filling it with nitrogen, is typically carried out for plant shutdowns or maintenance. In this case, it reportedly marks the preparatory stage for dismantling and selling the facilities.

EG, a primary ingredient in automotive coolants, and MMA, a key material for acrylic glass, have been flagship products for Lotte Chemical since the former Honam Petrochemical era in the 1970s. The plant generated annual sales of 3 trillion won ($2.15 billion) to 4 trillion won at its peak, but Lotte Chemical reported an operating loss of 413.6 billion won in the third quarter of 2024, the company’s fourth consecutive quarterly loss.

The company’s challenges reflect broader difficulties in Korea‘s petrochemical industry. LG Chem Ltd. has halted operations at its styrene monomer (SM) plant in the same industrial complex, while Hanwha Solutions Corp. issued perpetual bonds worth 700 billion won to bolster its financial structure. The industry is grappling with a crisis as China’s overproduction of general-purpose plastics erodes key export markets and floods the domestic market. In 2023, China’s annual ethylene production capacity reached 51.74 million tons, more than double the 25.65 million tons recorded in 2018.

In response to the downturn, the Korean government plans to announce a comprehensive support package for the petrochemical industry in December 2024. The measures are expected to include tax incentives and eased regulations on mergers and acquisitions, with additional steps under review to facilitate corporate consolidations.

Amid these challenges, Lotte Group has also implemented significant personnel changes. It replaced 21 affiliate chief executive officers (CEOs) and retired 22 percent of its executives, reducing the total number of executives by 13 percent compared to the end of 2023. In the chemical division, 10 of 13 CEOs were replaced, excluding three appointed in 2023, while 30 percent of executives in the division were retired.

As part of its leadership overhaul, Lotte Group promoted Shin Yoo-yeol, the eldest son of Chairman Shin Dong-bin, to vice president and appointed 12 CEOs born in the 1970s to drive a generational shift. Senior executives such as Lotte Corp. CEO Lee Dong-woo, Lee Young-goo of the food division, Kim Sang-hyun of the retail division, and Park Hyun-chul of Lotte Engineering & Construction Co. retained their positions.