[Exclusive] Lotte Fine Chemical Becomes World’s No.1 in Cellulose Production, Overcoming Petrochemical Slump

Production Capacity for Food and Pharmaceutical Use Expanded to 18,000 Tons
Ranked No. 1 in an Oligopolistic Market Dominated by Four Global Companies
Second Quarter Operating Profit Expected to Rise from 32.7 Billion Won to 35.7 Billion Won

Lotte Fine Chemical has become the world’s number one in cellulose production capacity for food and pharmaceutical use. In an oligopolistic market structure where the top four global companies control more than 80% of the market, this means Lotte Fine Chemical has secured the largest production capacity. Industry experts are evaluating this as a strategy to overcome the sluggish performance of general petrochemicals by focusing on high-value-added specialty products.

According to the industry on July 15, Lotte Fine Chemical expanded its annual production capacity to 18,000 tons last year after completing an expansion (6,000 tons/year) of its cellulose production line for food and pharmaceutical use. With this, Lotte Fine Chemical has become the global leader in production capacity for food and pharmaceutical cellulose, and began commercial production in the first half of this year.

The newly expanded production line manufactures cellulose for food and pharmaceutical purposes, which is used as raw material for pharmaceutical capsules and food additives. These are high-value-added products with higher profitability than industrial products such as cellulose for construction and paint. The new facilities were established at the Incheon plant.

Including industrial cellulose, the company’s total production capacity reaches approximately 70,000 tons. In December of last year, Lotte Fine Chemical strengthened its business competitiveness by acquiring the third HEC (hydroxyethyl cellulose) plant from Lotte Chemical with an annual capacity of 10,000 tons. This facility, located in Yeosu, produces cellulose additives for paints among industrial applications.

Since 2020, Lotte Fine Chemical has invested over 350 billion won in the cellulose business. Last year alone, capital expenditures (CAPEX) amounted to 263.6 billion won. Building on this, the company continues to expand production capacity for high-value-added cellulose products used in food and pharmaceutical additives, construction, and personal care sectors.

The expansion of investments is leading to an upgraded business portfolio. Sales in the green materials business segment have grown at a compound annual rate of 6.8% over the past five years, and its share of the company’s total sales increased from 22.5% in 2021 to 29.7% last year. During the same period, the export ratio of total sales also rose from 39% to 47%.

Food and pharmaceutical grade cellulose products from Lotte Fine Chemical. Lotte Fine Chemical

The focus on high-value-added products is also positively impacting company performance. According to financial information provider FnGuide, Lotte Fine Chemical’s consolidated sales for the second quarter of this year are projected at 497.3 billion won, with operating profit expected to reach 35.7 billion won. Compared to the first quarter (sales of 510.7 billion won and operating profit of 32.7 billion won), sales are projected to decrease slightly while operating profit increases, indicating improved profitability.

This is seen as evidence that the company’s profitability is improving as the share of specialty products grows amid the continued sluggishness of the general petrochemical market. In particular, food and pharmaceutical cellulose, used in pharmaceutical capsules and food additives, are high-value-added products with greater profitability than industrial cellulose. If the effects of the capacity expansion are reflected, the improvement in results is expected to be even greater.

Securities analysts also view the expansion of the cellulose business as a mid- to long-term growth engine. They analyze that increased production capacity, combined with a higher portion of high-value-added product sales, are likely to drive ongoing profitability improvements. Notably, the company’s ability to secure stable customers, especially in Europe and North America, is cited as a core strength for growth.

The cellulose business also has a high portion of overseas sales. More than 90% of cellulose products are exported, with Europe being the largest market. In addition, Lotte Fine Chemical is expanding its sales networks to the United States, South America, and Asia.

The cellulose market is structured as an oligopoly, with the top four global companies accounting for more than 80% of the total market. With this latest expansion, Lotte Fine Chemical has become number one in the world by production capacity, further strengthening its position in the global market. In the future, the company plans to further increase sales of high-value-added products centered on food and pharmaceutical cellulose, while stably supplying industrial cellulose to continue raising the share of its specialty business.

A Lotte Fine Chemical representative stated, "Cellulose can be divided into industrial and food/pharmaceutical types, and the recent expansion focused on food and pharmaceutical cellulose used in pharmaceutical capsules and food additives," adding, "As this is our most profitable product, we expect that this expansion will further strengthen our competitiveness in the high-value-added specialty business."

This content was produced with the assistance of AI translation services.