LG Chem likely to bask in China’s rate cut: report

HONG KONG (Yonhap News) ― LG Chem Ltd., South Korea’s top chemical maker, will likely benefit from China’s recent interest rate cut, as the move will boost the country’s petrochemical market, a report said Tuesday.

According to the Daishin Securities report, improving petrochemical market recovery expectations triggered by the decrease in interest rates will strengthen LG Chem’s business in China.

“China’s interest rate cut will contribute to a gradual recovery of the petrochemical market,” Jonathan Ahn, an analyst at Daishin Securities, said in the report. “Petrochemical demand and petrochemical prices in China will get a boost.”

Last Thursday, China’s central People’s Bank of China cut its key interest rates for the first time since 2008, suggesting the world’s No. 2 economy needs to boost its slowing economic growth.

China’s interest rate cut will add to positive momentum toward the petrochemical market’s recovery, Ahn said.

“In particular, the interest rate cut will help restore dealer demand that determines more than 70 percent of petrochemical pricing in China,” he said. “When China cut its interest rate last time, which was on September 16, 2008, a gradual recovery in petrochemical prices followed.”

China’s recent decision to reinstate subsidies for energy-efficient consumer electronics purchases will also help LG Chem, the analyst added.

LG Chem is the second largest producer of acrylonitrile butadiene styrene, which is heavily used to make home appliances, with an ABS production capacity of 1.33 million tons both in South Korea and China.