Petrochemical Chicken Game
Petrochemical Industry is also standing a critical crossroads of a “chicken game,” along with shipbuilding. Shipping and steel industries.
LG Chem is planning to increase its Daesan Plant’s annual ethylene production capacity from 1.04 million tons to 1.27 million tons by 2019 by investing 287 billion won. The largest ethylene producer in South Korea is currently producing 1.16 million tons of the chemical a year in Yeosu, too.
Lotte Chemical has already expanded its ethylene production facilities. Six years ago, it bought Titan, a Malaysian firm producing 0.72 million tons a year, for 1.5 trillion won and has enjoyed the boom in the market since then. Lotte Chemical is going to finalize its Yeosu Plant facility expansion plan within this year, too.
In the meantime, Chinese ethylene producers are likely to withdraw from the race in that most of them have produced ethylene from coal and its price is skyrocketing these days. The Chinese government is currently working on coal production cut for environmental protection and the coal price per ton increased from US$55 to more than US$90 between early this year and this month.
Likewise, the market price of polyvinyl chloride rose from US$720 to US$920 per ton during the same period. This can be attributed to Chinese companies giving up on production for a decline in profitability resulting from excessive supply and the increase in the price of coal as its raw material. Under the circumstances, South Korean companies such as LG Chem and Hanwha Chemical are looking to increase their polyvinyl chloride production volumes.
The price of terephthalic acid is showing an upward trend as well after a supply glut. “South Korean petrochemical companies are preparing for their second big match following that during the early 2010s,” said an industry source, adding, “Those winning the race at this time are expected to be dominating the global market for the time being.”