South Korean petrochem makers struggle to cut losses with shutdowns amid global supply glut

20-May-14

Domestic South Korean petrochemical companies are struggling to cut their losses by shutting down manufacturing facilities amid the global supply glut, as per businesskorea.co.kr. Hyundai Cosmo, a subsidiary of Hyundai Oil Bank, is mulling over stopping the production of 800,000 tons of paraxylene (PX) from next month. “The operation of the second plant, which produces 800,000 tons of PX, is scheduled to be stopped for regular repair and maintenance and energy efficiency enhancement,” said the parent company. However, industry insiders say that the shutdown is due to the recent drop in PX price. The price fell from US$1411 to US$1215 per ton between December last year and March 2014. Under the circumstances, S-Oil, GS Caltex, and Lotte Chemical have reduced their capacity ratios. The problem is several new PX production plant start ups - SK Incheon Petrochem and SK Chemicals, both of which are subsidiaries of SK Innovation, will run new facilities from late June with annual capacities of 1.3 million tons and one million tons, respectively. Samsung Total will add one million tons to its annual production volume from the second half of this year, too. The combined quantity is equivalent to more than half of the domestic PX production volume as of March. A series of bisphenol A (BPA) production plants are being closed due to a supply glut as well. BPA is a type of engineering plastic for use in automobiles, mobile phones, and electronics appliances. LG Chem, which had stopped its BPA production lines in Daesan, in February this year, was planning to reopen the plant this month, but has postponed the plan due to adverse market conditions. “Korean petrochemical corporations expanded their facilities to provide against rising demand in emerging markets such as China, but it has turned out that the demand increase falls short of their previous expectations,” an industry watcher explained, continuing, “The slimming down is likely to continue for a while unless demand recovers.”