South Korean export industry driven by global demand for petrochemicals
Mis à jour : 9 juil. 2019
Originally published in Forship News & Media
Petrochemical products are integral to modern societies as they include plastics, packaging, digital devices, medical equipment, fertilisers, detergents, tires and so on. They can also be found in batteries, solar panels and electric vehicle parts. South Korea is an ideal trading partner in said industry, not only because of the country’s know-how, but also because of its geographic location in proximity to some of the world’s most prominent import markets such as China, India, and increasingly Southeast Asia.
The petrochemical industry was born in South Korea in the 1970s as General Park Chung-Hee initiated the ‘Heavy-Chemical Industry Drive Plan’ aimed at establishing the country as a major producer of petrochemicals. This five-year plan helped the country develop a high level of expertise in the petrochemical industry through the adoption of new technologies and the opening of two major petrochemical complexes at Ulsan and Yeosu.
South Korea’s petrochemical production and exports are growing
It was not until the 1990s that the South Korean petrochemical industry exploded: the production increased drastically, which enabled the country to assert itself as a prominent exporter on a regional and global scale. Petrochemicals indeed play a key role in the country’s economic growth and have helped South Korean exports set a new high of $600 billion in 2018.
South Korea’s petrochemical industry is still experiencing significant growth due to a recent surge in global demand for oil products and ethylene. Last year, the overall export of petrochemicals rose 12 percent on-year to reach $50 billion. In fact, according to the Korea International Trade Association (KITA), in January 2018, 24 out of 33 petrochemicals in South Korea registered year-on-year growth in export volumes.
Increasing ethylene production to respond to global demand
In 1995, South Korea became one of the world’s main producers of ethylene, and today, it is the world’s fifth largest producer. It is estimated that South Korea will be contributing even more ethylene to the global market in 2019, especially through the Yeosu Complex that currently produces 46% of ethylene in the country.
National major petrochemical players have indeed committed to a $13 billion capital investment plan between 2018 and 2023 to increase ethylene production by adding 3 million tpa of production capacity by 2023, as well as develop basic chemicals such as polyethylene, polypropylene and xylenes plants.
China is a key importer of petrochemicals
China does not have the capability to produce locally enough petrochemicals to satisfy demand, and is therefore reliant on importing from other countries. South Korea is traditionally one of the main exporters of petrochemicals to China, especially for products such as ethylene and benzene.
China’s considerable need for petrochemicals in recent years has made South Korea dependent on the Chinese market for its export and economic growth. In 2018 in fact, China was the recipient of 47.5% of South Korea’s petrochemical exports.
China’s demand for petrochemicals has however been dwindling in recent months, and South Korean petrochemical companies are increasing investments to diversify their export market and prepare for changes in the business environment.