FocusSouth Korea PE makers diversify as China demand wanes

08 June 2010 05:41  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--South Korea’s polyethylene (PE) producers are diversifying their products and markets in response to weak China demand for a range of petrochemical products, particularly commodity PE film grades, industry sources said on Tuesday.

"We are producing more roto moulding linear low density PE (LLDPE) in June at the expense of commodity grades such as C4 and C6 LLDPE film,” a source at Daelim Industrial said.

The firm’s roto moulding LLDPE production in June would be increased to 3,500 tonnes, from a monthly average of 1,500 tonnes, the source said.

As a result, its combined C4 and C6 LLDPE output would be reduced to 1,000 tonnes in June, from a monthly average of 3,000 tonnes, he added.

Hanwha Chemical had switched its 155,000 tonne/year LLDPE at Yeosu to make LLDPE wire and cable grades in June which stemmed from weak demand from China for commodity LLDPE film grade, a company source said.

It would allocate 20% of the capacity at its two other LLDPE plants at Yeosu to make LLDPE coating grades, the source said.

The two plants had a combined capacity of 224,000 tonnes/year and the balance capacity would be used to make LLDPE film grade targeted at the India and southeast Asia markets, he added.

Meanwhile, some Korean producers said they were also increasingly unwilling to export specialty grades to China due to poor margins.

Daelim Industrial would cut its HDPE pipe grade production to 3,000 tonnes in June, from the monthly average of 4,000-5,000 tonnes, due to low weak demand and low prices in China, the Daelim source said.

"Our HDPE pipe sales to our key markets in Russia and Kazakhstan are yielding higher returns, so we’re reducing our HDPE pipe grade export to China in June,” he said. 

LG Chem also planned to cut its key low density PE (LDPE) coating grade export to China in June due to weak demand and low prices, a company source said.

Its LDPE coating grade export to China would be cut by 50% in June, from its monthly average of 3,000 tonnes, and the remaining supply would be diverted to India and southeast Asia, the LG Chem source said.

"We can sell LDPE coating grade to India and southeast Asia at around $1,560/tonne (€1,310) FOB (free on board) Korea, but buying ideas in China were below $1,490/tonne FOB Korea,” he said.

"China demand is very sluggish now and prices there are too low,” he added.

Some analysts expect South Korea’s petrochemicals exports to fall further in May due to a high base last year and uncertainties over the global economic condition, after falling 9% year on year in April.

South Korea exported 125,770 tonnes of PE to China in April this year, 22% or 27,725 tonnes lower year-on-year, according to Korea International Trade Association (KITA).

($1 = €0.84)

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By: Chow Bee Lin
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