S Korea January petchem exports surge; China demand unabated

SINGAPORE (ICIS news)--South Korea’s petrochemical exports recorded a 27% year-on-year jump in January, with shipments to China, the country’s biggest market, surging nearly 90% in spite of the Chinese authorities’ crackdown on rapid loan growth, analysts said on Wednesday.

“For the first 20 days of January, exports (of petrochemicals) to China grew 88.5%, much higher than other export destinations,” said Sung-Kwong Lee, an economist at brokerage Shinhan Investment in Seoul.

Polymethyl methacrylate (PMMA) led the surge, with exports more than doubling to 8,917 tonnes from the same period last year, data from the Korea International Trade Association (KITA) showed.

A substantial portion of the PMMA went to China, where TV manufacturers like Samsung and LG Electronics have operations.

Naphtha exports from Asia’s fourth-largest economy jumped around 76% in January to 241,281 tonnes from a year ago, while exports of mixed xylene more than doubled to 51,564 tonnes from 21,263 tonnes a year earlier.

The bulk or 60% of South Korea’s petrochemical output have been heading into China as domestic demand has been weak, said Jae Joong Kim, an analyst with Woori Investments and Securities. 

The latest trade data indicated that China’s move to rein in credit growth failed to curb the country’s demand for petrochemical imports, which was favourable for South Korea, said Lee of Shinshan Securities.

Exports into China would likely maintain their current strong momentum for some time as the Chinese government looked set to tighten liquidity “on a gradual basis” to ensure its economy would grow at 9.5-10% this year, Lee said.

But the January figures may be insufficient to predict the short-term impact of China’s monetary policy, he added.

“We would have to see the figures in February and March. But export growth rate in the first half of the year is expected to be better than the second half,” Lee said.

Seasonal considerations could also have led to the surge in January exports, said Kim of Woori Investments and Securities.

“Seasonally, in the couple of weeks before the Lunar New Year, petrochemicals exports to China increase as buyers want to stockpile inventories,” Kim said.

The Chinese market was on holiday the whole of last week for the Lunar New Year celebrations.

February may see a strong surge in South Korean petrochemical exports into China on a year-on-year basis given the low base in the same period in 2009, when producers operated their plants at reduced capacity due to the economic downturn, said Kim from Woori Securities.

South Korea’s petrochemical exports to ASEAN (Association of South East Asian Nations) countries in January grew 50.3% year on year, while its exports to Central and Latin American countries registered a growth of 47.3%, Lee said.

Exports to the US over the same period, however, declined by around 12% while shipments to countries in the European Union (EU) fell by almost 28%, he added.