The South Korean petrochemical industry, which enjoyed an unprecedented boom over the past three years, seems to be on a decline in the face of multiple issues such as rising feedstock prices, fierce competition overseas and falling domestic demand.High oil prices have impacted the price of feedstock materials, affecting margins. China, a large market for the Korean petrochemicals has recently witnessed a glut in output. Rising supplies from the Middle East have also created hurdles. The plants to come onstream in China recently include SECCO with an annual capacity of 900,000 tons in March, followed by YBS's 600,000 tpa plant in July. CNOOC also plans its 800,000 tpa plant to come onstream in December. Globally, South Africa's Sasol is expected to make 1 million tons of petrochemical products in Iran starting from SeptemberThis has sent export prices down, giving rise to concerns of a deteriorating profitability. A receding economy that has dampened domestic consumption that shows no sign of reviving. Supply is projected to far outpace demand in the global petrochemicals market starting from the latter half of this year. The petrochem trade surplus accounts for 30% of the overall trade surplus of Korea and with dwindling exports, the scenario seems pretty grim. Until last year, global demand far exceeded supply, making it possible for export prices to absorb the increased burden in costs caused by high oil prices. Now, the situation is no longer so and the industry has to take on the heavy burden coming from oil prices. Domestic demand is dwindling as the economy seems to be receding. Will Korea go the Japan way? Will petrochemicals companies see massive mergers and move on to producing high value-added goods?
18-Jul-05 
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