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China’s demand for austerity policies has led to a significant reduction in demand, while Asia’s petrochemical market supply has increased substantially as a result of competing investments in the past two or three years. South Korean petrochemical companies that produce plastic products and chemical fiber raw materials have recently been unhappy, and the first-quarter results are likely to be significantly lower than last year.
In addition, rising international oil prices further pushed up costs. The prices of naphtha and ethylene, the main raw materials, have risen as crude oil prices have risen, but the price of petrochemical products has declined due to a decrease in demand. The Korea Petrochemical Association stated that from March last year to March this year, naphtha and ethylene rose 7.7% and 9.4% respectively. However, the price of low-density polyethylene (LDPE) with ethylene as raw material fell by 16%, and TPA, a raw material for synthetic fiber, plunged by 23.5%.
South Korea’s petrochemical companies are preparing to control production by stopping work and adjusting routine maintenance time. KPX Fine Chemical suspended the Polyurethane Raw Material Factory from the end of last year to January this year for three months. Samsung Petrochemical also decided to suspend production of high-precision terephthalic acid (PTA) devices with an annual output of 700,000 tons for more than a month on the 25th.
The enterprises of Jeollanam-do Lishui Industrial Park have also entered the routine maintenance period since March. Hunan Petrochemical conducted routine maintenance of Lishui plant from March 1st to April 10th. The Lichuan NCC also entered a one-month regular maintenance period starting on the 20th.
Since the global financial crisis hit the global chemical industry in the fourth quarter of 2008, the petrochemical market once again fell into a slump for more than three years. The sharp decrease in demand after the Chinese government implemented the tightening policy in the second quarter of last year has become a direct cause. Last year, South Korea’s total petrochemical exports totaled US$46.1 billion, of which 47% was exported to China.
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