[Click eStock] "Lotte Chemical, China's Coal Price Surge... Benefiting from the Ripple Effect"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities analyzed that the sharp rise in Chinese coal prices is expected to bring indirect benefits to domestic polyethylene (PE), polypropylene (PP), and MEG companies such as Lotte Chemical.

According to Kiwoom Securities on the 12th, the coal price in China at the beginning of January was 782 yuan per ton, rising about 70% compared to last year's low point. As COVID-19 confirmed cases decreased and industrial activity in China recovered, winter heating consumption increased. Additionally, supply decreased due to expanded crackdowns on illegal mining and pollutant emissions, as well as the Chinese government's restrictions on Australian coal imports, leading to the price increase.

Kiwoom Securities analyzed that due to this coal price increase, the CTO (coal-to-olefin process) and CTMEG margins in China, which had recorded higher-than-expected levels in the second half of last year, have recently been sharply eroded. Furthermore, with the rebound in methanol prices, the profitability of Chinese MTO projects is also declining, so indirect benefits are expected for domestic PE, PP, and MEG companies including Lotte Chemical.

Researcher Lee Dong-wook stated, "Especially, due to last year's cracker accident and increased inventory in China, Lotte Chemical's ethylene oxide (EO) and ethylene glycol (EG) divisions recorded poor performance last year. However, with the rise in Chinese coal prices improving the economics of integrated steam cracker facilities, expanded concerns over CTMEG quality, and reflecting the full-year effect of Yeosu EOA (ethylene oxide derivatives) expansion, performance improvement is expected this year compared to last year."

This content was produced with the assistance of AI translation services.