Pasir Gudang facility panoramic view (2020), A.I. enhanced | Source: jobstore.com

Market Insights | ppPLUS Intelligence Series • Refining & Petrochemicals | May 2026

NC1 Shutdown: December 2024

Naphtha Cracker No. 1 (NC1), with a nameplate capacity of 430,000 tonnes per year of ethylene, was shut down effective 15 December 2024. LOTTE Chemical Titan Holding Berhad (LCTH) cited sustained cash losses over the preceding two years as the primary driver, framing the closure as "temporary" pending an improvement in market conditions.

The decision followed nine consecutive quarters of net losses for LCTH, with the company recording a net loss of RM246.42 million in Q3 2024 alone. NC1's closure removed approximately one-third of LCTM's Malaysian ethylene and propylene capacity, leaving Naphtha Cracker No. 2 (NC2, 869,000 tpy) as the sole active cracker at Pasir Gudang.

Analyst reaction was broadly positive: CGS International Research described the shutdown as "a positive development", noting that it would reduce cash burn and rationalise the company's cost base, albeit at the expense of a further decline in utilisation rates. The research house projected LCTH's effective utilisation rate for 2025 at approximately 37%, reflecting the production loss from NC1.

2025 Operations: Continued Losses, Structural Challenges

Through 2025, Pasir Gudang operated under conditions of structural overcapacity and weak margins. NC2 was running at only 45–50% of its nameplate capacity as of mid-2025, according to an LCTH vice president speaking to Reuters. Average plant utilisation across the Malaysian and Indonesian portfolio stood at approximately 50% by Q3 2025, excluding contributions from the newly commissioned LINE project in Indonesia.
 

LCI Cilegon (Indonesia) New Ethylene (LINE) facility | Credit: Lotte Chemical Titan Holding / The Edge TV Youtube video (Dec 13, 2025)

Financial results reflected these operational conditions. LCTH recorded a record full-year net loss of RM2.13 billion for FY2025, the worst in its history as a listed company. Revenue for Q3 2025 rose 26% year-on-year to RM2,445 million, largely due to commissioning-phase product sales from the LINE complex in Cilegon, Indonesia, which commenced commercial operations on 15 October 2025.

The polymer-naphtha spread — the principal margin indicator for LCTM — remained compressed, with HDPE-naphtha spreads in the range of USD 200–300 per tonne since mid-2023, well below the levels needed for profitable operation at Pasir Gudang's cost structure. Lotte Chemical Corporation, the Korean parent, also reported declining profitability and initiated a group-wide restructuring review, including consideration of asset divestments.

2026: The Hormuz Crisis Compounds Existing Pressures

The closure of the Strait of Hormuz on 28 February 2026, following the escalation of the US-Israel-Iran conflict, introduced a new and acute layer of supply-side disruption. Asian naphtha crackers, including NC2 at Pasir Gudang, rely heavily on Middle Eastern naphtha, and the disruption immediately translated into feedstock availability constraints and price spikes.

In March 2026, LCTH was among the Asian petrochemical producers that issued customer notifications flagging potential force majeure and indicating difficulty meeting supply commitments. The company executed an intra-group emergency naphtha transfer of RM103.7 million (approximately USD 25.3 million) from its Malaysian subsidiary to PT Lotte Chemical Indonesia (LCI) in Cilegon, utilising pre-war Malaysian stockpiles. Those stockpiles were projected to support LCI's downstream operations only through approximately May 2026, after which a force majeure declaration was considered a high probability.

Rolling Maintenance Shutdowns: April–June 2026

Against this backdrop, LCTH scheduled a programme of rolling maintenance shutdowns across the Pasir Gudang complex for May and June 2026, affecting multiple polyolefin units. These shutdowns are planned maintenance events rather than financially driven closures, but their timing — coinciding with the Hormuz crisis and low NC2 operating rates — further restricts near-term product availability from the site.

Simultaneously, PT Lotte Chemical Titan Nusantara (LCTN) at Merak, Indonesia, scheduled a 30-day HDPE maintenance shutdown starting around 13 May 2026, with an LLDPE restart planned for the same week. Although planned in advance, the shutdown reduces PE supply availability to the Indonesian domestic market at a moment when feedstock supply to the Merak/Cilegon integrated complex is already constrained by the Hormuz disruption.
 

Photo (A.I. enhanced): LCTN Merak facility with the three gas phase reactors visible | Source: Kontan.co.id (June 20, 2025)

NC1 Restart Outlook

As of May 2026, NC1 remains offline with no confirmed restart date. The conditions cited by LCTH for a potential restart — sustained improvement in market conditions and polymer-naphtha spreads — have not materialised. On the contrary, the Hormuz crisis has introduced new feedstock cost volatility that complicates any near-term restart planning. Even NC2 is running below nameplate capacity due to naphtha availability constraints, making a parallel recommissioning of NC1 operationally and economically implausible in the near term.

Operational Status Summary

Note: This assessment draws from the following sources: The Edge Malaysia, The Star Malaysia, New Straits Times, BusinessToday Malaysia, ICIS, ChemAnalyst, Commoplast, Reuters, CGS International Research, Lotte Chemical Titan Holding Berhad Bursa Malaysia filings, Lotte Chemical Corporation investor communications, Plastics & Rubber Asia, MRC Hub, and ResourceWise.

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