Business

Raw material scarcity forces Lotte to shut plant

Company cites current economic situation and its impact on opening LCs

Our Correspondent March 15, 2023

After withdrawal of protection, Lotte Chemical has been suffering losses or the last 4 years. PHOTO: PR

ISLAMABAD:

In yet another setback for Pakistan’s struggling economy, Lotte Chemical has been forced to shut down its plant due to unavailability of Letters of Credit (LCs) for raw material import.

The company has cited the current economic situation in Pakistan and its impact on the ability of banks to open LCs as the reason for the temporary suspension of its plant operation.

Lotte Chemical Pakistan Limited declared, in a notification to Pakistan Stock Exchange, that it would temporarily halt plant operation starting March 15 due to the company’s incapacity to import raw material.

“Due to the current economic situation in the country in relation to the foreign exchange reserves and its impact on the ability of banks to open Letters of Credit for import of raw material, the company is unable to continue its production activities,” read the notice.

“Therefore, the company has decided to temporarily suspend plant operations from March 15, 2023 till further notice.”

Lotte produces pure terephthalic acid, which is primarily used in manufacturing saturated polyester like polyethylene terephthalate as well as related polymer products such as resins, thin films, fibres and bottles. Downstream demand for the company’s products has diminished. For example, textile sector’s exports decreased by 28.1% year-on-year and 9.1% month-on-month to $1.2 billion in February 2023, the lowest monthly exports since May 2021, when they stood at $1.05 billion, and the fifth consecutive year-on-year decline.

Lately, several companies in Pakistan have announced complete or partial shutdowns, citing various reasons which include reduced market demand and their inability to maintain inventory due to the challenge of opening LCs.

Honda Atlas Cars (Pakistan) Limited has also announced that it will temporarily shut down its plant from March 9 to 31 owing to supply chain disruptions.

Published in The Express Tribune, March 15^th, 2023.

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