01/20/2014

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KOREA (SOUTH): Korea's petrochem industry in crisis mode due to China risk

According to industry sources, the domestic industry producing purified terephthalic acid (PTA), the raw material for polyester and PET bottles, has been devastated by the aggressive capacity expansion by Chinese suppliers. Chinese PTA producers will build 5.4 million tons of additional PTA capacity by 2015 following 7.0 million tons in 2012 and 8.2 million tons in 2013, accounting for about 60 percent of the world's PTA output.

At this rate, a Korean petrochemical company official said, the PTA self-sufficiency ratio for China will rise to more than 90 % by 2016 from 64 $ in 2008. The main reason Korea's major petrochemical suppliers such as Samsung Petrochemical and SK Petrochemical have been reporting losses has to do with the fact that their PTA exports have declined since 2010 in the face of Chinese competition.

The same is true for other products such as ethylene and propylene. The percentage of global ethylene output accounted for by Chinese suppliers has risen to 13.4 % in 2013 from 11.6 % in 2010 and is projected to increase to 15.0 % by 2017.

The Chinese companies are also improving their cost competitiveness by substituting their energy source to clean coal. For example, Wison (Nanjing) Clean Energy has begun operations of its coal-based Nanjing plant in September 2013. It is estimated coal-based petrochemical plants can save cost by 20 to 30 % in comparison with oil-based producers. By 2015, there will be at least 15 such petrochemical plants in China.

Source: "The Korea Economic Daily", Seoul; 24 Dec 2013
(Syed Rashid Ali, Karachi, Pakistan)

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