LG Chem Ltd., South Korea’s chemical major, is seeking to sell its film factories at home amid accelerating business reorganization centered around its new growth drivers to mitigate a prolonged slump in the global petrochemical market.
According to sources in the chemical industry on Wednesday, LG Chem has decided to look for a new owner of its display film factories in Ochang and Cheongju in North Chungcheong Province.
With the disposal, the company is expected to exit from the information technology (IT) materials business, which was once a lucrative business with fixed customers like TV set makers.
LG Chem’s mainstay petrochemical business reported losses for three quarters in a row in the second quarter ended in June this year. In the January-June period, it logged 63.5 billion won ($47.4 million) in loss versus more than 4 trillion won in profit in 2021.
The petrochemical division’s average utilization rate skid to 76.0% in the first half of this year from 81.4% in 2022 and 91.9% in 2021.
On the contrary, the advanced materials division, which produces battery materials like cathodes and separators, raked in nearly 1 trillion won in operating profit in 2022, a big gain from 14.4 billion won in 2019.
LG Chem CEO Shin Hak-Cheol (Courtesy of LG Chem) Battery materials are one of the company’s three new growth engines.
The film factories in the company’s Ochang and Cheongju campuses produce display films and polarizer.
The company’s decision to let go its film factories comes after the dwindling TV demand has dampened demand for display films.
Even after TV demand recovers, the Korean chemical giant is expected to face fiercer competition from Chinese petrochemical peers that have rushed to mass produce display materials, boding ill for the overall profitability of its display materials business.
After abandoning general display films, LG Chem is expected to focus on special premium films used in batteries.
The company already shuttered styrene monomer (SM) lines in its Daesan complex in May as part of its efforts to replace versatile petrochemical products with advanced green materials.
It plans to build 10 factories for eco-friendly materials, including biodegradable random copolymer polybutylene adipate terephthalate (PBAT) and high-value-added polyolefin Elastomer (POE)-based solar film facilities slated to commence mass production in phases from 2024.
LG Chem's plant material-based eco-friendly ABS (Courtesy of LG Chem) GREEN MATERIALS AS NEW GROWTH DRIVER
LG Chem has set a goal to generate 8 trillion won in revenue from eco-friendly materials by 2030. It earned 1.9 trillion won from the business in 2022.
The company bets big on the plastics recycling market, which is forecast to grow to 100 trillion won in sales by 2028, as well as biodegradable and other biomaterials sectors, which are projected to grow at an annual average of 20% over the same period.
