UpdateHigh prices to keep S Korea petrochemical exports growing

26 September 2011 09:24  [Source: ICIS news]

(adds more details, analyst’s quotes in paragraphs 6-8)

By Nurluqman Suratman

SINGAPORE (ICIS)--Higher prices allowed South Korea’s petrochemical exports in August to increase 36.5% year on year to $5.32bn (€3.94bn), bolstering hopes that the value of monthly shipments will remain strong through end-2011 despite a weakening of global demand, analysts said on Monday.

The US, the world’s biggest economy, is in a fragile state, while the eurozone is deeply embroiled in its debt troubles. Meanwhile, China – South Korea’s main export market for petrochemicals – is beset with its own problems of reining in inflation, creating a credit crunch within the country.

Against the gloomy global economic backdrop, demand prospects for South Korea’s exports do no look very promising.

“Macroeconomic data from August 2011 indicated a slowdown in US GDP growth and consumer spending, while China’s GDP growth is also expected to slow in coming years. These developments could adversely affect the [South Korea’s] trade balance,” said Ashwin Matabadal, an economist at Rabobank Nederland’s economic research department.

South Korea’s overall exports to the US in August fell by 5.9% in the first 20 days in August while total shipments to China rose by 16.5%, according to the Ministry of Knowledge Economy (MKE).

Total exports to the 27 countries of the EU rose 7% year on year in August, the MKE said.

“We expect [overall] exports for the final quarter of this year to register one-digit growth instead of the two-digit growth seen recently because of the economic situation in the US and Europe,” said Lee Sung-Kwon, chief economist at Seoul-based Shinhan Investment Corp.

About a third of South Korea’s exports, including re-exports from China, head towards the US and Europe, according to Lee.

In August, export volumes of most of South Koreas major petrochemical products grew on a year-on-year basis, according to data from Korea International Trade Association (KITA) showed. (Please see table below)

Overseas shipments of ethylene surged 76% year on year to 86,187 tonnes in August, while exports of propylene surged by 89.9% to 84,140 tonnes, the data showed.

Exports of polypropylene (PP) grew by 46.6% to 93,698 tonnes, while overseas shipments of polyethylene fell by 5.28% to 101,190 tonnes, according to KITA.

Among other aromatics products, shipments of benzene rose 8.54% year on year to 112,487 tonnes, while exports of paraxylene (PX) were up by 40.1% to 173,777 tonnes, KITA data showed.

Shipments of methyl methacrylate (MMA), on the other hand, slumped by 53.9% year on year to 569 tonnes in August, while shipments of polymethyl methacrylate (PMMA) fell by 15.3% to 7,612 tonnes, the data showed.

For the first 20 days in August, South Korea’s exports of petroleum products surged by 84.5% to $5.07bn, according to MKE data.

Overseas shipments of textiles fell by 15.7% to $1.22bn over the same period, while exports of automobiles rose by 32.5% to $3.23bn, the data showed.

For the whole month of August, South Korea’s overall exports increased 27.1% year on year to $46.4bn, with total imports up 29.2% year on year to $45.6bn, resulting in a trade surplus of $800m, according to the MKE.

While overall trade has been robust this year, risks are to the downside, said Rabobank’s Matabadal.

But higher prices can mask a decline in volumes of shipments.

“Spot prices of petrochemical products are much higher now than last year, and this is pushing up export values. We see US dollar-based exports increasing in the fourth quarter on a year-on-year basis,” said Hong Chanyang, a petrochemicals industry analyst at Seoul-based Shinhan Investment Corp.

Prices of petrochemical products usually track the movement of crude prices in the international market, analysts said.

“Sales of petrochemical and petroleum products, especially those sold on a US dollar basis are sensitive to crude prices,” Hong said, adding that buoyant global oil futures will continue drive petrochemical product prices higher in the medium-term.

EXPORTS (in tonnes)
PRODUCT	August  '11	August '10	YoY Difference	% Change YoY
Naphtha	314,630	362,404	-47,774	-13.18
Ethylene	86,187	48,944	37,243	76.09
Benzene	112,487	103,639	8,848	8.54
Polypropylene	93,698	63,925	29,773	46.57
Polyethylene	101,190	106,826	-5,636	-5.28
LLDPE	49,417	52,459	-3,042	-5.80
LDPE	30,199	23,258	6,941	29.84
HDPE	101,190	106,826	-5,636	-5.28
Toluene	78,309	61,978	16,331	26.35
Propylene	84,140	44,318	39,822	89.86
Butadiene Rubber	25,209	21,838	3,371	15.44
Buta-1,3-diene and isoprene	14,832	19,038	-4,206	-22.09
Styrene	127,201	117,953	9,248	7.84
Paraxylene	173,777	124,061	49,716	40.07
PET	71,657	78,685	-7,028	-8.93
Mixed Xylene Isomers	37,624	43,066	-5,442	-12.64
PTA	307,670	292,886	14,784	5.05
MMA	569	1,235	-666	-53.93
PMMA	7,612	8,982	-1,370	-15.25
Orthoxylene	7,752	17,451	-9,699	-55.58
Expansible polystyrene	14,087	13,625	462	3.39
Acrylonitrile	18,847	13,810	5,037	36.47
Polycarbonate	34,986	29,317	5,669	19.34
Ethyl Acetate	580	1,729	-1,149	-66.45
Vinyl Acetate Monomer	7,857	6,844	1,013	14.80
Paraffin Wax (slack wax and scale wax)	527	707	-180	-25.46
P-wax with less than 0.75%	105	78	27	34.62
PVC (not mixed with other substances)	56,341	45,029	11,312	25.12
PVC (non-plasticised)	69	130	-61	-46.92
PVC (plasticised)	1,706	1,890	-184	-9.74
PVC (In aqueous dispersion)	15	25	-10	-40.00

Source: KITA

($1 = €0.74)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Nurluqman Suratman

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