Korean petrochemical firms exceeded market expectations with first-quarter earnings, but analysts warn it is too early for optimism. Prolonged geopolitical tensions could lead to losses in the second half. LG Chem and Hanwha Solutions reported profits after recent losses.
Korean petrochemical firms reported first-quarter earnings that beat market expectations on May 5, 2026, but analysts caution against optimism amid ongoing geopolitical tensions. Prolonged disruptions in logistics raise fears of a return to losses in the second half.
LG Chem announced its petrochemical operating profit reached 164.8 billion won ($112 million), rebounding from a 239 billion won loss in the fourth quarter of last year. The company attributed the recovery to lower-cost raw materials and the European Union's reinstatement of antidumping tariffs.
"This reflects our efforts to cut costs, improve our business portfolio and strengthen structural competitiveness," LG Chem Chief Financial Officer Cha Dong-seok said during a first-quarter earnings conference call. "We had already begun turning a profit even before the Iran conflict escalated in February."
Hanwha Solutions' Chemical Division posted 34.1 billion won in operating profit on April 28, its first in two and a half years. IBK Securities analyst Lee Dong-wook said on Monday that Lotte Chemical is expected to report 81.5 billion won, its first profit in 10 quarters, while SK Innovation should show solid chemical profits versus prior losses.
Analysts predict profitability through the second quarter, aided by government support for naphtha procurement, a key feedstock for products like plastic bags. However, they warn rising feedstock prices and low plant utilization could constrain gains. "If tensions in the Middle East persist, profitability improvements will be constrained by higher-priced naphtha and low plant utilization rates," LS Securities analyst Jeong Kyung-hee said in a report on LG Chem.
Domestic firms have faced declining profits from oversupply of low-priced Chinese products, leading to agreements with the government to reduce naphtha cracking center capacity nationwide. The Iran conflict has worsened naphtha shortages via Strait of Hormuz disruptions, prompting some firms to scale back operations and warn customers of potential supply issues.
