Global Polyester Giants like SK Group and Lotte Chemical Scale Back Production

For decades, developed countries such as the U.S., Japan, and Europe leveraged their first-mover advantage to dominate high-margin segments of the chemical industry, including PX and PET, with considerable reliance on imports.

However, in recent years, China's rapid expansion of its full polyester industry chain has driven down product margins globally. Coupled with the impacts of the global energy crisis and inflation, the competitiveness of overseas chemical production has further diminished, leading several global giants to cut back on polyester capacity.

Recently, Canadian depolymerization company Loop Industries disclosed financial struggles in its latest report, revealing that it might face a cash flow crisis by the end of November. In January 2024, Loop had announced a significant investment agreement with Europe-based Reed Management, expecting the deal to close by March. However, the funds failed to materialize, and Loop did not respond to media inquiries regarding the status of the transaction.

Earlier, South Korean energy giant SK Innovation's subsidiary, SK Geo Centric, terminated its plan to build a plastic recycling plant in Saint-Avold, northeastern France. The project was a joint effort with French waste management company SUEZ and Loop Industries, aimed at developing an advanced PET recycling facility. However, with the cost of producing recycled PET nearly double the market price, the project was shelved.

In January 2024, Loop Industries had signed an MoU with Reed Management to advance its Infinite Loop™ technology in Europe, backed by a €60 million ($69 million) investment plan. This included €30 million in non-dilutive capital for technology commercialization and another €30 million for strategic joint ventures across Europe, including the Saint-Avold project. However, in September, French financial services firm Société Générale acquired a 75% stake in Reed Management, potentially altering the company's plans.

Lotte Chemical Corporation recently announced the indefinite suspension of operations at part of its petrochemical complex in Yeosu, South Korea, citing ongoing financial pressures and unfavorable market conditions.

The suspension involves the second unit, which includes PET, ethylene glycol (EG), and ethylene oxide derivatives (EOA). According to CommoPlast, the 400,000-ton/year EG and 230,000-ton/year EOA units were taken offline as of December 3, 2024.

The company has faced mounting challenges from oversupply and price competition, especially from Chinese petrochemical producers. Earlier in 2024, Lotte paused operations at PET plants in Yeosu and Ulsan, with a combined capacity of 520,000 tons per year, with no restart plans disclosed.

Lotte Chemical reported an operating loss of KRW 413.6 billion ($316 million) in Q3 2024, bringing cumulative losses for the year to KRW 660 billion ($505 million). Cost-cutting measures have been implemented at its Yeosu and Daesan facilities, while approximately 70 employees from the suspended units have been reassigned, suggesting the shutdown may be long-term.

Since 2019, China's polyester capacity has grown steadily, with a significant surge in 2022–2023. New installations from companies such as Sichuan Hanjiang, Sanfangxiang, Chongqing Wankai, Fujian Baihong, Hainan Yisheng, and Jiangyin Chenggao added a combined 4 million tons of capacity, representing a 40.4% growth rate.

The trend continued in 2024, with several new projects adding 2.22 million tons of capacity in the first half of the year, including contributions from Anhui Haoyuan (600,000 tons), Dalian Yisheng (1.4 million tons), Lanshan Tunhe (100,000 tons), and Xinjiang Yipu (120,000 tons). China's total PET capacity now stands at 19.195 million tons, intensifying market competition.

PET production in China has kept pace with capacity growth, showing an average annual increase of 12.66% between 2019 and 2023. In 2023, China's PET bottle-grade production reached 13.1893 million tons, up 2.0981 million tons (18.92%) from the previous year.

In 2024, polyester bottle-grade chips became the top contributor to new polyester capacity in China, surpassing polyester filament. While both segments added 4.72 million tons in 2023, 3.3 million tons of bottle-grade PET capacity was commissioned in 2024, accounting for 58% of all new installations.

As global giants scale back, China continues to dominate the PET market with unparalleled growth and competitive advantages, securing its position as the leader in global polyester production.