A Growing Risk from China
Korea’s petrochemical exports to China are plummeting amid China’s economic slowdown and rising self-sufficiency in petrochemical products.
Exports of petrochemicals, one of Korea's main export items, fell 5.4 percent year on year in January. In December of last year, exports dropped 6.3 percent.
The sharp decline in exports of petrochemical products is blamed on sluggish exports to China. In January, Korea's exports to China fell 19.1 percent year on year. Exports of petrochemical and petroleum products fell 13.7 percent and 36.4 percent, respectively.
About half of Korea’s petrochemical exports go to China. Last year, China accounted of 47.5 percent of Korea’s petrochemical exports, down 3.5 percentage points from 2017. In monetary terms, the value of exports to China accounted for 43.6 percent of the total, down 2.4 percentage points from 2017.
Exports of major domestic petrochemical companies are lopsided toward China as well. In the case of SK Innovation, 90 percent of petrochemical exports go to China. The ratio is 60 percent for Hanwha Total. “Korean petrochemical companies have failed to diversify their export markets and continue to rely on China,” an industry official said. "China has been the biggest export market for Korean petrochemical companies."
The problem is that China's economy will not grow as fast as it did before and China’s self-sufficiency rate in petrochemical products is rising. The International Monetary Fund recently lowered its forecast on China's economic growth for this year to 6.2 percent from 6.4 percent. China's global exports growth also fell from 9.6 percent in August to 4.4 percent in December.
China’s self-sufficiency in petrochemical products is also on the rise. Its self-sufficiency rate has already exceeded 100 percent for high-purity terephthalic acid (PTA), polyvinyl chloride (PVC), polystyrene (PS) and acrylates.