Korea’s petrochemicals export volume is continuously rising on a series of free trade agreements (FTA).
According to a report published by the Korea International Trade Association (KITA) on Dec. 31, the country’s petrochemical export volume from January to October 2015 stood at 27.9 million tons, up 5.4 percent from the total export volume in 2014. When adding exports in the remaining two months, it is possible for the country to see a double-digit growth rate from 2014.
By item, exports of petrochemical intermediate materials, such as propylene oxide (PO) and para-xylene (PX), amounted to 6.04 million tons during the same period, up as much as 28.2 percent from the total exports in 2014. The export volume of products, except for basic chemicals including synthetic rubber and ethylene and petrochemical synthetic materials such as polyethylene and vinyl chloride, grew overall last year.
By country, petrochemical exports to Turkey, China, the U.S., Vietnam and Japan surged, while both the export volume and value to India, Taiwan, Indonesia and Thailand plunged. After the FTA between Korea and Turkey took effect in May 2013, exports to Turkey showed growth rates of 55.5 percent in 2014 and 25.8 percent in 2015, continuously seeing the highest growth among major export countries. However, exports to India, Indonesia and Thailand decreased due to the economic recession in emerging countries, though the FTAs with these countries came into effect, just like Turkey.
The KITA said that the price competitiveness of domestic petrochemical products improved as the countries lowered and lifted tariffs on petrochemical products of 5.5 to 6.5 percent on average after signing the FTAs. It also led to the increase in exports to major countries which signed the FTAs with Korea.
Accordingly, domestic oil and chemical businesses, the exports of which account for more than half of their overall sales, saw significant growth in operating profits. Although international oil prices have recently dropped to some US$30 (35,325 won), the Singapore gross refining margin, which shows a sale price difference between crude oil and oil products, goes up and down constantly at the level of US$7 to $8 (8,243 to 9,420 won) a barrel. Considering the margin of US$3 to $4 (3,533 to 4,710 won) a barrel during July to Aug. 2014, the market environment is much better. As a result, SK Innovation, which recorded operating losses in 2014, posted 1.5 trillion won (US$1.27 billion) in operating profit in the petrochemical business as of the third quarter last year.