Lotte Chemical Titan plunges to historic low as naphtha-olefin margin squeeze triggers record losses

Malaysia’s Lotte Chemical Titan Holding Bhd reported its largest quarterly and full-year losses on record for FY2025, highlighting the continued margin pressure confronting regional polymer producers.

Although fourth-quarter losses narrowed slightly from the prior quarter, the group remains burdened by structurally weak spreads and rising fixed costs. Across Asia, oversupply in key polymer chains has curtailed producers’ ability to restore margins, leaving earnings under sustained strain.

Industry participants describe the situation as a “double squeeze”: soft downstream olefin and polyethylene prices amid abundant regional supply, coupled with relatively firm naphtha feedstock costs. Analysts note that profitability will remain elusive as long as the HDPE-to-naphtha spread stays below the estimated $300/ton breakeven threshold.

Operating rates reflect cautious production management. Malaysian facilities ran at 61% capacity in the latest quarter, with full-year utilisation averaging 52%, signaling deliberate output adjustments to mitigate losses. Meanwhile, the group’s $3.95 billion LINE integrated complex in Indonesia operated at roughly 80% capacity but still posted gross losses, underlining that current margins are insufficient to cover fixed operating costs even at elevated run rates.

Looking ahead, meaningful margin recovery will hinge on regional supply discipline. South Korea recently approved a major petrochemical restructuring programme to consolidate capacity and temporarily shutter selected crackers. If executed effectively, the initiative could alleviate export pressure from North Asia and support Southeast Asian olefin and polyolefin spreads.

Yet analysts caution that supply-side measures alone may not restore profitability. A sustained rebound in physical demand will be essential before Lotte Chemical Titan and peers can achieve stable earnings.

Written by: Aiman Haikal