Fire shuts Lotte Chemical’s Daesan cracker in S Korea; 31 injured

Author: Nurluqman Suratman

2020/03/04

SINGAPORE (ICIS)--A fire at Lotte Chemical’s naphtha cracker in Daesan, South Korea on Wednesday injured at least 31 people and forced the shutdown of the facility and some downstream units.

The blaze erupted at the cracker’s compressor, the company said in a bourse filing.

The Daesan cracker can produce 1.1m tonnes/year of ethylene and 540,000 tonnes/year of propylene, according to ICIS data.

The incident, which occurred at around 03:00 Seoul time (20:00 GMT), has slowed down operations at Lotte Chemical’s downstream plants in Daesan, according to a source close to the company.

It is unclear how long the cracker will be down.

The cracker shutdown added further pressure to open-specification naphtha prices, with prices down $2/tonne from the previous day’s close early on Wednesday.

The 150,000 tonne/year butadiene (BD) plant at the site was also taken offline and may remain shut for a month.

A force majeure on BD supply may have to be issued and this will tighten supply in the market, according to sources.

BD prices have fallen nearly 25% since late January to $730/tonne CFR NE Asia on 28 February due to surplus supply and slump in demand, ICIS data showed.

Lotte Chemical’s 135,000 tonne/year ethylene vinyl acetate (EVA)/low density polyethylene (LDPE) swing plant in Daesan was not affected by the blast, a company source said.

The plant is currently on an EVA production campaign since early March, but the current operating rate is unknown.

Other chemicals produced at the Daesan complex include benzene, ethylene glycols, ethylene oxide, glycol ethers, mixed xylenes, toluene, polyethylene (PE), polypropylene (PP) and styrene, according to ICIS data.

The company's monoethylene glycol (MEG) operations were also affected by the cracker outage, with the 250,000 tonne/year No 1 unit shut following the explosion, according to market sources.

Lotte Chemical has a total MEG capacity of 650,000 tonnes/year at Daesan. It is not immediately clear if the 400,000 tonne/year No 2 MEG unit at the site is still running.

The shutdown at the Daesan cracker does not have a direct impact on production at the Lotte Chemical Corp's 50,000 tonne/year MMA plant in Yeosu at the moment, but sources said that a prolonged shutdown at the cracker will likely weigh on future supply.

Lotte MCC is currently investigating impact to its production. It has a 90,000 tonne/year methyl methacrylate (MMA) plant at the Daesan site, and also methacrylic acid and hydroxy ethyl methacrylate (HEMA) production facilities there.

Lotte MCC Corporation runs a 90,000 tonne/year MMA plant and two PMMA plants - one with 50,000 tonnes/year of capacity and another with 60,000 tonnes/year of capacity - in Yeosu.

On the polyolefins front, the incident at the Daesan site is not seen to have an impact on southeast Asian polyethylene (PE) orders because the plant was not a major supplier to the southeast Asian region.

Lotte Chemical’s Daesan plant has a nameplate capacity of 345,000 tonnes/year of linear low density PE (LLDPE) and 45,000 tonnes/year of low density PE (LDPE).

Several market sources said LLDPE production has already been shut in the wake of the explosion, but this could not yet be confirmed.

“We are investigating detailed damages and plan to minimize production disruptions,” Lotte Chemical said, citing that the complex accounts for 21.8% of the company’s total sales.

In 2019, Lotte Chemical’s total revenue stood at won (W) 15.1tr ($13bn), down 5.9% year on year, while operating profit was down 43.1% at W1.11tr.

Korean news agency Yonhap reported on Wednesday that the fire at the plant erupted following an explosion, with at least 31 people injured, two of whom are in serious condition.

The fire was mostly put out after raging for more than two hours, it said.

Production at seven of the 13 facilities in Daesan was suspended after the fire, Yonhap reported.

(recasts paragraphs 15-17 for clarity, adds details throughout)

($1 = W1,186)

Additional reporting by Yeow Pei Lin, Helen Yan and Helen Lee, Li Li Chng, Pearl Bantillo, Judith Wang and Izham Ahmad

Photo: A petrochemical complex of Lotte Chemical (Source: Lotte Chemical)