S. Korean firms not positive about global petrochemical business

22, Dec. 2018

SEOUL, AJU - Thanks to a global economic recovery that boosted the demand of both oil products and ethylene, South Korea's petrochemical industry has enjoyed a boom called "Super Cycle" that played a key role in economic growth and exports.

Experts are split over when the bubble will finally burst. Petrochemical companies at home and abroad have expanded the production of ethylene, causing oversupply. However, South Korean petrochemical companies presented a gloomy outlook next year, citing uncertainties such as a Sino-U.S. trade war and oil prices.

"As many experts are worried, our business will not be good next year," LG Chemical vice chairman and CEO Park Jin-soo said in a business conference in Seoul, describing a fall in ethylene prices and unfavorable oil prices as "the biggest problem." "This trend will continue for the next few years."

Industry data showed that ethylene prices stayed $841 per ton as of December 7, compared to $1,335 in December last year. Domestic firms produce ethylene by cracking naphtha, while U.S. firms produce ethylene by cracking from shale gas.

"The year 2019 is quite worrisome" despite a forecast by IHS Markit, a London-based global information provider, at the Asia Petrochemical Conference in August that the petrochemical industry would see strong demand for a while, Lotte Chemical Corporation vice chairman Huh Soo-Young said in a conference Thursday in Seoul.

As a solution, the business executives called for mergers and aggressive efforts to improve their profit structure. Domestic petrochemical firms came up with different strategies.

"2019 will be a year in which the difference of each company is obvious," Park said. LG Chemical has diversified its business portfolio prioritizing batteries for electric vehicles and high-performance synthetic resin while Hanwha Chemical is expected to speed up the expansion of its solar panel business.

"As solar module prices are showing signs of a rebound and demand is growing, we have a positive market outlook," Hanwha Chemical's executive vice chairman and CEO, Kim Chang-Bum, said. "We will also actively pursue mergers and acquisitions if needed."