Asian petchem producers’ Q2/H1 results hampered by overcapacity

Oil, chemicals and petrochemicals producers across Asia have revealed their financial results for the April-June period and H1 2024. The supply snug – driven by the relentless capacity additions in China – appear to have taken its toll on the financial performance of many petrochemical producers particularly in Southeast Asia, South Korea and India while Japan, having already started the industry rationalization, has fared relatively better. China, meanwhile, has outperformed expectations.

Southeast Asian producers suffer from dire results: Rationalization seems a must

Petrochemical producers in Southeast Asia posted significantly lower year-on-year results in the second quarter. While most of the producers posted net losses, only Thailand’s PTTGC bucked the trend and posted a net profit. Despite very weak results in the region, not much has been done to rationalize, apart from Shell selling all its assets in Singapore.

Thailand’s SCG Chemicals, a subsidiary of Siam Cement Public Co. (SCG), recorded a net loss of 1.2 billion baht ($33.1 million) in Q2 2024, reversing from a net profit of 741 million baht ($20.5 million) the previous year.

Thailand-based petrochemical producer Indorama Ventures reported a net loss of $637 million in the second quarter of 2024, compared to a $12 million profit in the same quarter last year and a $31 million profit in the previous quarter.

Malaysia’s Lotte Chemical Titan Holding narrowed its net loss to RM248.89 million ($53.64 million) in Q2 2024, down from RM313.47 million ($67.18 million) a year earlier, due to lower sales volume and a write-down of inventories. Despite the yearly narrowing, Q2 loss widened from the previous quarter’s RM178 million ($37 million).

Indonesia’s petrochemical producer Chandra Asri reported a loss of $48.9 billion for the first half of 2024 compared to a $3.5 billion profit recorded in the same period of last year.

Defying the trend, the government revealed plans to help restructure the country’s petrochemical industry with extraordinary measures back in May, there is no immediate reflection on the industry yet.

LG Chem, South Korea’s leading chemical company, reported a dramatic 91% drop in its second-quarter net profit due to a significant decline in shareholding gains from its battery unit. Net profit fell to 59.79 billion won ($43 million) from 670.81 billion won ($492 million) a year earlier. Nonetheless, LG Chem’s petrochemicals unit reported an operating profit of 32 billion won ($23.7 million) for the quarter, reversing the 13 billion won ($9.6 million) loss recorded in the same period last year.

SK Innovation also announced its Q2 2024 results with revenue of KRW 18.8 trillion ($13.6 billion) and an operating loss of KRW 45.8 billion ($33.2 million). Compared to the Q1 revenue of 381 billion won ($276 million) and an operating loss of 12.7 billion won ($9 million), the company raised its revenue but widened its operating loss in the April-June period.

Hanwha Chemicals’ Q2 operating loss, meanwhile, narrowed to 108 billion won ($80 million) from 214 billion won in Q1. Compared to the same period last year, it swong to a net loss, though. Operating loss from its chemicals segment also narrowed to 17 billion won ($12.7 million) from 19 billion won ($14 million) in Q1 whereas Q2 2023 suggested an operating profit of 50 billion won ($37 million).

Lotte Chemical also widened its net attributable loss in the second quarter to 109.4 billion won ($82 million) from 106.0 billion won ($79 million) a year earlier and 60 billion won ($45 million) in the first quarter this year. Before announcing the bleak financial results in August, the company had announced a transformative shift in its portfolio including a reduction of the proportion of the basic chemicals business in July, as a part of the restructuring plans amidst the challenges the industry has been going through.

Indian producers’ profits also down

The state-run refiner Indian Oil Company (IOC) reported a notable yearly drop of 81% in its standalone net profit for the first quarter of 2024/2025 fiscal year ended June 30, bringing the figure to INR26,43 billion ($322 million). Net profit was also down by 76% when compared to INR108 billion ($1.32 billion) in the last quarter of the previous fiscal year of 2023-2024.

India’s Reliance Industries Ltd (RIL) reported a consolidated profit of 151.38 billion rupees ($1.81 billion) for the April-to-June period (Q1FY25), down from 160.11 billion rupees ($1.9 billion) the previous year. The company’s profit also declined from 189.51 billion rupees ($2.2 billion) reported in the last quarter.

Japanese producers post better results

Producers in Japan revealed better results for the April-June period, the first quarter of fiscal year 2024. As oversupply from China and reduction in domestic demand made it difficult to secure profits, most Japanese companies have been rationalizing to protect their margins. In March, Idemitsu Kosan and Mitsui Chemicals began talks to consolidate their ethylene complexes in Chiba, Japan to optimize production. Mitsui also announced in November 2023 that it would permanently shut its PET facility in Iwakuni Otake plant in Yamaguchi, Japan by October 2024. The company previously shut a 400,000 tons/year PTA plant permanently at Iwakuni-Ohtake Works site in August 2023.

Moreover, Japanese petrochemical producer Japan Polyethylene recently announced plans to close a high-density polyethylene (HDPE) manufacturing line at its Mizushima plant by May 2026 due to increasing competition and declining demand.

Shin-Etsu Chemical reported a net income of 144 billion yen ($1 billion) in the April - June 2024 period, the first quarter of fiscal year 2024, down by 6.3% compared to the same quarter last year. However, net income was higher from 113.6 billion yen ($786 million) announced in January-March quarter.

Mitsui Chemicals announced a net income of 17.9 billion yen ($123 million) for April-June quarter, marking a significant increase of 87% from the 9.6 billion yen ($66 million) reported in the same period last year.

Sumitomo Chemical reported a net income of 24.4 billion yen ($166 million) in the April- June period compared to a 33.2 billion yen ($226 million) loss in the same quarter the previous year.

Chinese companies report robust earnings

Overcapacity from China has negatively impacted the earnings of other Asian producers, yet record-breaking production has only driven the earnings of Chinese producers higher. Two major Chinese companies reported stronger earnings for the first half of 2024.

China’s Sinopec announced a net income of 37.1 billion yuan ($5.21 billion) for the first half of 2024, marking a 2.6% increase compared to the same period last year. Record oil and gas production drove this improvement, which offset the decline in domestic demand for refined fuels and petrochemicals.

PetroChina reported a 3.9% increase in its net income for the six months ending in June, reaching a new high of 88.61 billion yuan ($12.4 billion). This growth was attributed to higher sales prices of crude oil and gasoline, increased natural gas sales, and stronger volumes and prices of polyethylene and other products.