South Korea Petrochemicals Report 2012
Developments in the South Korean petrochemicals industry are intended to serve the automotive and electronics sector, but a slowdown in Asian and European markets will undermine profitability over 2012 as demand for cars and consumer goods slows to a crawl, according to BMI’s latest South Korea Petrochemicals Report.
In terms of basic chemicals, Honam Petrochemical will lead expansion over the medium term with growth at its Yeosu complex, where capacities are set to rise by 250,000tpa ethylene, 120,000tpa propylene, 250,000tpa HDPE and 200,000tpa PP in 2013. Growth in the automotive and electronics industries in South Korea and elsewhere in Asia is prompting a significant growth in synthetic rubbers with Kumho Petrochemical planning to opening new facilities at Yeosu, which are due to come online in 2014 with capacities of 60,000tpa styrene butadiene rubber, 150,000tpa bisphenol-A, 60,000tpa ethylene propylene diene monomer (EPDM) rubber and 50,000tpa methylene di-para-phenylene isocynate (MDI).
BASF is also planning to raise capacity for MDI at its Yeosu site. The expansion by 60,000tpa to 250,000tpa is scheduled for completion in Q212. At the same time, it is due to complete a 198,000tpa film-grade PET facility at Jincheon.
Polysilicon, used for electronics and solar cells, is also set to become a growth driver, prompting OCI to expand its third polysilicon plant by 7,000tpa in December and two new plants coming onstream in Q412 and Q413 with capacities of 20,000tpa and 24,000tpa respectively. Daesan MMA is increasing its MMA capacity by 98,000tpa to 188,000tpa from Q113 and expanding its acrylic resin pellet production capacity by 60,000tpa to 110,000tpa from Q412. Asahi Kasei Chemicals (AKC), an Asahi Kasei subsidiary, is planning to construct a large new plant for the production of acrylonitrile (AN) at Ulsan. Construction of the 245,000tpa plant is expected to be completed by Q113.
The success of the expansion of downstream Korean petrochemicals production depends on major export markets, notably China, Europe and the US. Profitability declined as 2011 progressed due to a weakening of derivative exports to China and increased Asian supply as Japanese production capacity came back online following the March earthquake. Meanwhile, the slowdown in the European market and the potential for a double-dip recession has limited export growth in finished manufactured goods such as televisions and vehicles, thereby limiting demand up the supply chain. The situation is likely to be sustained throughout 2012.
Inflationary pressures are mounting in the Chinese economy, and we expect to see further tightening measures, which would likely exacerbate weaknesses in the Chinese housing market. Given that the property sector has been the main engine of growth for the entire mainland economy, a correction would inevitably hurt Chinese demand for South Korean goods. On the upside, South Korea could benefit from Japan's misfortune. South Korea competes with Japan on many fronts, and as orders are transferred away from Japanese suppliers due to the production disruptions, their South Korean rivals could enjoy stronger demand. Specifically, South Korean firms in sectors such as chemicals as well as key chemicals consuming segments such as the automotive and electronics industries are well-placed to fill up any gaps left by Japan in the global market and even possibly boost their market shares. Meanwhile, Japanese demand for South Korean exports could surge over the medium term on the back of Japan's massive reconstruction efforts.
In terms of basic chemicals, Honam Petrochemical will lead expansion over the medium term with growth at its Yeosu complex, where capacities are set to rise by 250,000tpa ethylene, 120,000tpa propylene, 250,000tpa HDPE and 200,000tpa PP in 2013. Growth in the automotive and electronics industries in South Korea and elsewhere in Asia is prompting a significant growth in synthetic rubbers with Kumho Petrochemical planning to opening new facilities at Yeosu, which are due to come online in 2014 with capacities of 60,000tpa styrene butadiene rubber, 150,000tpa bisphenol-A, 60,000tpa ethylene propylene diene monomer (EPDM) rubber and 50,000tpa methylene di-para-phenylene isocynate (MDI).
BASF is also planning to raise capacity for MDI at its Yeosu site. The expansion by 60,000tpa to 250,000tpa is scheduled for completion in Q212. At the same time, it is due to complete a 198,000tpa film-grade PET facility at Jincheon.
Polysilicon, used for electronics and solar cells, is also set to become a growth driver, prompting OCI to expand its third polysilicon plant by 7,000tpa in December and two new plants coming onstream in Q412 and Q413 with capacities of 20,000tpa and 24,000tpa respectively. Daesan MMA is increasing its MMA capacity by 98,000tpa to 188,000tpa from Q113 and expanding its acrylic resin pellet production capacity by 60,000tpa to 110,000tpa from Q412. Asahi Kasei Chemicals (AKC), an Asahi Kasei subsidiary, is planning to construct a large new plant for the production of acrylonitrile (AN) at Ulsan. Construction of the 245,000tpa plant is expected to be completed by Q113.
The success of the expansion of downstream Korean petrochemicals production depends on major export markets, notably China, Europe and the US. Profitability declined as 2011 progressed due to a weakening of derivative exports to China and increased Asian supply as Japanese production capacity came back online following the March earthquake. Meanwhile, the slowdown in the European market and the potential for a double-dip recession has limited export growth in finished manufactured goods such as televisions and vehicles, thereby limiting demand up the supply chain. The situation is likely to be sustained throughout 2012.
Inflationary pressures are mounting in the Chinese economy, and we expect to see further tightening measures, which would likely exacerbate weaknesses in the Chinese housing market. Given that the property sector has been the main engine of growth for the entire mainland economy, a correction would inevitably hurt Chinese demand for South Korean goods. On the upside, South Korea could benefit from Japan's misfortune. South Korea competes with Japan on many fronts, and as orders are transferred away from Japanese suppliers due to the production disruptions, their South Korean rivals could enjoy stronger demand. Specifically, South Korean firms in sectors such as chemicals as well as key chemicals consuming segments such as the automotive and electronics industries are well-placed to fill up any gaps left by Japan in the global market and even possibly boost their market shares. Meanwhile, Japanese demand for South Korean exports could surge over the medium term on the back of Japan's massive reconstruction efforts.
Contents
Executive SummarySWOT Analysis
Table: South Korea Petrochemicals Industry SWOT
South Korea Political SWOT
South Korea Economic SWOT
South Korea Business Environment SWOT
Global Petrochemicals Overview
Petrochemicals Market Overview
Table: World Ethylene Production By Country, 2011 And 2015 (‘000 tonnes capacity)
Financial Results
Table: Financial Results Of Major Petrochemicals Companies, 2010
Global Oil Products Price Outlook
Emerging Asia Petrochemicals Overview
South Korea Market Overview
Market Structure
Regulatory Structure
Table: South Korea Olefins Facilities
Table: South Korea Aromatics and Intermediates Facilities
Table: South Korea Polyolefins Facilities
Industry Trends And Developments
Downstream Developments
Petrochemicals Business Environment Ratings
Table: Asia Pacific Petrochemicals Business Environment Ratings
Limits Of Potential Returns
Risks To Realisation Of Returns
Industry Forecast Scenario
Table: South Korea’s Petrochemicals Sector, 2007-2016 (‘000 tpa, unless otherwise stated)
Macroeconomic Outlook
Table: South Korea - Economic Activity
Company Profile
Honam Petrochemical Corporation
LG Chem
SK Group
Samsung Total Petrochemicals
Korea Petrochemicals Industrial Company
GS Caltex (LG Caltex)
Glossary Of Terms
Table: Glossary Of Petrochemicals Terms
Methodology
How We Generate Our Industry Forecasts
Chemicals And Petrochemicals Industry
Cross Checks
Business Environment Ratings
Table: Petrochemicals Business Environment Indicators And Rationale
Weighting
Table: Weighting Of Indicators Skip to top