Lotte Chemical Titan, the Malaysian subsidiary of Lotte Chemical, has taken decisive steps to mitigate its financial losses, including shutting down a major facility in Malaysia. On January 2, foreign media reported that the company ceased operations at its Naphtha Cracker No. 1 (NC1) plant in Pasir Gudang, Johor, on December 15, 2024. The NC1 facility, with an annual production capacity of 430,000 tons of petrochemicals such as ethylene and propylene, has been a critical part of the company's operations.

Industry observers attribute the closure to escalating manufacturing costs, as the market prices for petrochemical products remain insufficient to offset the rising expenses of raw materials like naphtha. Since the third quarter of 2022, Lotte Chemical Titan has endured nine consecutive quarters of financial losses, marking the NC1 shutdown as a drastic attempt to curb its mounting deficits.

The facility's utilization rate has also witnessed a steady decline over recent years. From an average of 69% in the third quarter of 2022, the rate dropped to 47% in the second quarter of 2024 before recovering slightly to 58% in the third quarter. Projections for 2025 suggest the rate could fall below 40%, intensifying concerns about the plant's viability.

Further complicating matters is the limited financial backing from Lotte Chemical’s headquarters, which is grappling with its own prolonged losses. After achieving an operating profit of 1.53 trillion won ($1 billion) in 2021, the parent company suffered a 760 billion won deficit in 2022. Its struggles continued through 2023, with cumulative losses reaching 660 billion won by the third quarter of 2024.

In response to these challenges, Lotte Chemical has initiated restructuring measures across its global operations to enhance financial stability. However, these efforts have been met with significant hurdles. Reports suggest that Lotte Chemical Titan may even explore divestment as a potential solution to its ongoing financial woes.

The shutdown of the NC1 plant underscores the dire state of the petrochemical industry amid volatile market conditions and rising operational costs. While restructuring and cost-cutting measures aim to stabilize operations, the outlook remains uncertain, particularly given the broader challenges facing Lotte Chemical's global operations. As the company continues to evaluate strategic options, including divestments, it remains to be seen whether these efforts will be sufficient to restore financial health.