Recently published research from Business Monitor International, "South Korea Petrochemicals Report 2013", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 02/18/2013 -- BMI's South Korea petrochemicals report examines the potential for investment in the industry in the context of the severe downside risks associated with the Chinese economic downturn. We look at the main trends that are emerging as the country seeks to become a major player in the petrochemicals production chain serving the fast-growing Asian packaging sector.
The industry is focusing on adding value to the chemicals chain and serving the domestic electronics and automotive industries with an emphasis on quality and specialisation. The major story for the South Korean petrochemicals industry is ongoing rapid expansion in aromatics, with xylenes capacity set to exceed 10mn tonnes per annum (tpa) by 2014, more than double the level in 2010. Xylenes are an important aspect of Korea's expansion efforts, as the country's petrochemicals producers seek to take advantage of demand from Chinese polyethylene terephthalate (PET) producers. Other segments will register more limited growth and will be tied to the fortunes of the country's automotive industry, particularly the butadiene-fed intermediate products used in tyres, sealants and car upholstery.
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BMI has revised the following forecasts/views:
- South Korean demand for naphtha, which is the country's sole petrochemicals feedstock, is accelerating with the development of naphtha-based aromatics capacity. Over the medium term, South Korea will have a stable supply of naphtha feedstock, which depends on refining rates. However, Korean refineries have historically suffered from chronic over-capacity and low operating rates.
- While packaging is a market sector that has generally weathered the downturn in the Chinese economy, the sheer scale of Korean capacity growth threatens disequilibrium in the market and could drive down north-east Asian prices and erode margins. Increased paraxylene (PX) capacity without a corresponding increase in domestic PET levels means that there will be no attempt to add value to Korean aromatics down the production chain.
- BMI believes South Korean petrochemicals producers are likely to face a squeeze on margins in 2013 due to the influence of rising crude prices on naphtha, which may prompt some short-term downtime in production, particularly in basic chemicals. While exports are likely to pick up alongside a recovery, the pace of growth is unlikely to be strong owing to continued economic weakness in China and lingering uncertainty in the eurozone.
- With its score rising 2.3 points since 2012, South Korea has shot to the top of BMI's Asia Petrochemicals Risk/Reward Ratings (RRRs). Increasing confidence in long-term risk factors has driven the country's score up, with its financial and external risk components scoring far better than most other industrialised economies. Nevertheless, the 0.9 point lead over China could be eroded over 2013 if Chinese risk factors improve.
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