SCG halts operations at Vietnam complex

SET-listed Siam Cement Group (SCG), Thailand’s largest cement maker and industrial conglomerate, has suspended operations at its Long Son Petrochemicals (LSP) complex in Vietnam in order to cope with high production costs and the impact of a downturn in the global petrochemical market.
The suspension, slated to last for at least six months, began in mid-October, only roughly two weeks after LSP commenced commercial operations on Sept 30, with a production capacity of 74,000 tonnes.
“We have to adjust our business in response to challenges in the petrochemical industry,” said Thammasak Sethaudom, president and chief executive of SCG.
Global demand for chemical products is slowing and the chemicals’ spread is low. Chemical spread refers to the difference between the prices of chemical products and their costs, resembling a profit margin.
A resumption of operations will mainly depend on the spread, according to SCG.
The petrochemical complex uses naphtha, which is a product of fossil fuels, as a key raw material to produce high density polyethylene (HDPE), but the prices of naphtha are expensive.
“The spread between naphtha and HDPE prices is US$300 per tonne because of a slowdown in the global petrochemical market,” said Sakchai Patiparnpreechavud, chief executive and president of SCG Chemicals. “If the spread increases to $400 per tonne, we will consider resuming operations at LSP.”
The suspension does not mean SCG Chemicals will stop investing in this petrochemical complex, he said.
SCG Chemicals plans to upgrade LSP, enabling it to use ethane, a colourless, odourless, gaseous hydrocarbon, as a raw material because it is cheaper than naphtha.
Mr Sakchai said the company will spend $700 million on the new investment, especially to build an ethane storage facility.
In addition to the adjustment to the company’s petrochemical business, SCG also plans to reduce the total costs of the firms under its wing by 5 billion baht by 2025, said Mr Thammasak.
It will also cut working capital by 10 billion baht by the first quarter of 2025 and discontinue unprofitable businesses, he said.
From January to September this year, SCG posted a year-on-year rise in revenue of just 0.4% to 381 billion baht, with profit plunging by 75% year-on-year to 6.8 billion.