25 January 2010 07:21 [Source: ICIS news]
SINGAPORE (ICIS news)--South Korea will continue to rely on China’s consumption to beef up its petrochemical production, but the strong demand witnessed in 2009 may not be repeated this year, analysts said on Monday.
The country exported a record 98,760 tonnes of polymethyl methacrylate (PMMA) last year, up a staggering 70% a year ago, based on data from the Korea International Trade Association (KITA), driven by strong demand for flat-screen televisions (TVs).
South Korean petrochemical companies had been lucky last year, when competitors from
The country had also remained the biggest Asian exporter of base oils, with nearly 2.83m tonnes of the lubricant shipped in 2009, up 9% from 2008, based on the same data.
Weakness of the Korean currency, the won, provided
But new petrochemical capacities coming on stream in
“This will mean that the Asian petchem industry will face a supply surplus situation,” Yi said.
But now, efforts to cool down a possible overheating of the Asian mammoth economy may have some negative repercussions on its neighbouring countries, particularly those that look to it for export support.
“The changes in monetary policy is bad news for Asian petchem companies as there will be less liquidity in China which should limit speculative demand for petrochemicals,” Yi of Samsung Securities said.
Petrochemical prices in Asia have started to soften last week upon news of the monetary tightening in China but industry players were holding on to expectations of better demand from end-users that should buoy prices this year.
China has about a quarter share in the overall exports of South Korea over the past four quarters, with the situation unlikely to change this year given continued economic weakness in the US and Europe, said Vishnu Viswarathan, Singapore-based economist at research firm Forecast.
“There were some surprises in the fourth quarter (of 2010) as far as exports and manufacturing are concerned. A lot can be attributed to China’s uptake of South Korean exports,” said Viswarathan.
“Clearly, China exports accounting for a lion’s share of what goes out of South Korea, overtaking the US for quite a while now,” he said.
The South Korean economy continues to be driven by exports of goods, which account for roughly 40% of the country’s GDP.
Viswarathan said he projects the country’s exports to grow at “mid-teens to 20% levels” year on year, largely due to a low base in 2009.
“We don’t really see an excessive and enduring kind of growth. It is really just reflecting the double-digit declines in 2009,” he said.
With additional reporting by Vincent Xiang and Anu Agarwal
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