An explosion at Lotte Chemical's complex in Daesan, South Korea, early Wednesday injured 31 people and shut plants including a 1.1 million mt/year naphtha cracker, according to the company and local government.
The fire, which occurred at around 3 am local time, started at a compression unit of the cracker, which affected feed supply to downstream units, closing seven out of 10 facilities at the complex, a company official said.
Plants affected include a benzene-toluene-xylene (BTX) unit, a butadiene unit, a polyethylene unit and two polypropylene units, the official said.
It was unclear when operations could resume as investigations are carried out to determine the cause of fire, the company official said.
"We are trying to minimize the disruptions, but it may take a while," he said.
The cracker may remain off-line for about a month, naphtha traders in Singapore said.
But another industry source in South Korea said it may take at least one year to replace parts destroyed as the explosion was at the compressor gas-charging suction line.
Such parts are made to order and cracker operators normally do not keep spares of such components because they are expensive and huge, the source said.
The shutdown was expected to cut naphtha demand, which has already been under pressure from the coronavirus disease 2019 (COVID-19), naphtha traders said.
"Lotte might have to sell naphtha going forward, or naphtha deliveries to Lotte in Daesan might have to be pushed back," said a feedstock procurement official at a Japanese petrochemical producer.
It may have to change destinations of cargoes that are headed to Daesan, the official said, although he has not heard of such moves yet.
The Daesan cracker is estimated to consume 92,500 mt of naphtha a month, according to IHS Markit OPIS data. The company operates another cracker in Yeosu with an annual ethylene capacity of 1.2 million mt.
The cracker closure did affect the Asian naphtha market with prices losing more ground than overnight crude losses.
April naphtha swaps based on Japan prices were at $436.10/mt this morning, down from $442.50/mt on Tuesday, according to a broker.
The company may suffer a revenue loss of $2.8 billion, which the amount of sales the Daesan complex generated last year, amounting to 21.8% of total revenue, it said in a filing to the financial regulator.
The Lotte official said actual loss would be lower than the estimate as it would depend on the recovery period.
The complex is able to produce 550,000 mt/year of propylene, 500,000 mt/year of polypropylene and 150,000 mt/year of butadiene, according to IHS Markit.
Lotte also operates two polyethylene units, one 290,000 mt/year plant was shut down, while the other with a 130,000 mt/year capacity was operating normally, the company official said.
Its BTX unit has the capacity to produce 220,000 mt/year of benzene, 102,000 mt/year of toluene and 60,000 mt/year of xylene.
A source said the styrene monomer (SM) plant with a 577,000 mt/year capacity was also down and expects Lotte to declare force majeure.
However, a Lotte official said he was told that the SM plant was operating.
The blast, however, has so far had little impact on the downstream markets as Lotte's toluene and MX capacity are relatively small, while SM inventories are high in the region.
Meanwhile, the neighboring LG Chem's Daesan complex was operating normally although the blast injured one of the company's worker, a source with a direct knowledge of the matter said.
LG Chem operates two crackers, one in Daesan with 1.27 million mt/year and the other in Yeosu with 1.16 million mt/year of ethylene output capacities.
Of the 31 people hurt in the explosion, four were Lotte employees and 26 local residents, according to the Lotte official.
-- Reporting by Jongwoo Cheon, Jongwoo.cheon@ihsmarkit.com , Sok Peng Chua sokpeng.chua@ihsmarkit.com , Masayuki Kitano masayuki.kitano@ihsmarkit.com
-- Editing by Raj Rajendran, Rajendran.Ramasamy@ihsmarkit.com
Copyright, Oil Price Information Service
