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Lotte Chemical Pakistan Limited (LOTCHEM) is focusing on value addition and innovation to sustain growth and strengthen its position amid economic challenges and rising import competition, reports WealthPK.

During the first quarter of the ongoing calendar year (1QCY25), the company faced significant fluctuations in global energy and petrochemical markets, with crude oil prices initially surging but later falling due to oversupply, the reversal of OPEC+ production cuts, and ongoing geopolitical uncertainties.

As a result, this volatility put downward pressure on prices of essential feedstocks such as paraxylene (PX) and purified terephthalic acid (PTA), which are critical to LOTCHEM’s operations.

On the domestic front, the polyester sector showed resilience, with capacity utilisation rising to 75%, supported by seasonal demand from the textile and polyethylene terephthalate (PET) industries. However, overall demand remained subdued relative to prior years, dampened by elevated inflation and persistent competition from lower-cost imports facilitated by the Export Facilitation Scheme (EFS).

Furthermore, the surge in cheaper imports has taken a heavy toll on LOTCHEM’s performance. In 1QCY25, sales dropped 22% to 99,671 tonnes, despite an 8% rise in production. Hence, weakened domestic demand forced the company to halt plant operations from March 28 to April 17 to manage excess inventory.

As a result, quarterly revenue plunged 33% compared to last year, while rising gas prices further squeezed margins, bringing gross profit down to Rs1.3 billion from Rs1.6 billion. The situation reveals the ongoing economic strain from uncontrolled low-cost imports, which continue to weaken domestic manufacturing, threaten livelihoods, and widen the country’s external deficits.

In response to mounting challenges, LOTCHEM is transitioning from a volume-based approach to a strategy centered on value addition and operational efficiency. Therefore, the company is actively diversifying its product range, improving quality, and delivering greater value to customers in order to limit its vulnerability to commodity price fluctuations and import competition.

Meanwhile, LOTCHEM sustained high production levels to boost efficiency and lower costs, while ensuring steady, high-quality supply for the textile and PET sectors.

Despite current headwinds, LOTCHEM remains confident in its long-term outlook and its contribution to Pakistan’s economic development. Management expects seasonal demand, particularly from the textile sector, during the summer months, to offer some near-term relief. However, cost pressures from rising energy prices and continued import competition are expected to persist.

Going forward, LOTCHEM is pursuing various initiatives to strengthen its competitiveness and increase value addition, focusing on developing specialty PTA grades and downstream products for high-end polyester applications like technical textiles and advanced packaging.

Moreover, LOTCHEM is advancing sustainability through energy-efficient technologies, PET recycling, and digitalisation to enhance operations and customer engagement, strengthening its market position and supporting Pakistan’s industrial progress.

Going forward, LOTCHEM’s focus on value addition, operational efficiency, and innovation is crucial to address the challenges faced by polyester manufacturers in Pakistan, including volatile feedstock prices, escalating energy costs, and intensified import competition.

Credit: INP-WealthPk