Japan and South Korea have a good chemical industry
In the third and fourth quarters of 2003, the Japanese economy rebounded significantly. Most chemical companies (such as Sumitomo Chemical, Mitsui Chemicals, and Asahi Kasei Chemicals) saw the economy continue to recover in 2004, expanding its production capacity and investing in new equipment. Companies that manufacture electronic products and produce chemicals for the electronic products and the automotive industry will benefit more than others. The continued strong growth of China's economy is also beneficial to Japanese chemical companies, as China will continue to need undersupply products, especially high-value chemicals. Last year, Japan’s chemicals, steel, and tires exported to China increased by 20% to 80%, and Japanese manufacturing manufacturers also increased their production in China. However, Japanese chemical companies also face the problem of excess ethylene production capacity and weak demand. Japan's ethylene producers are facing the competition of low-cost Ethylene ethylene in the Middle East and will be particularly difficult. In the Middle East, ethylene will reach the Asian market before 2006. Some Japanese companies clearly see this threat and have taken actions to increase the production of propylene and specialty chemicals. One of them is Nippon Petrochemical Company, which will start production of an olefin metathesis device at the Kawasaki Plant in August to increase propylene production from 280,000 to 430,000 t. It is expected that the Asian propylene market will continue to tighten, and its gap may increase from 300,000 tons in 2003 to 500,000 tons in 2004. The 2004 earnings of Korean chemical companies (especially those with crackers) are expected to be much better than last year. The stock prices of these companies have soared in recent months. For example, the stock price of LG Chemical Co., Ltd. increased by 38% from October of last year to January of this year. Since the price of natural gas is higher than the price of crude oil (the price of natural gas soars), the economic conditions of crackers have changed, and Asian producers who use naphtha as raw materials have benefited. (Two-thirds of the U.S. ethylene industry uses natural gas as raw material. Europe is used for natural gas and liquid raw materials). In addition, the prices of by-product propylene and aromatics also soared. This year, Korean companies’ products continued to make profits. For example, polyethylene naphthalene-based petrochemical complex gross margin increased from US$ 100/t in January last year to US$ 150/t in January of this year, and the gross profit of ethylene glycol units was US$ 170. Eight increased to 250 US dollars / t. PVC is also facing a boom in 2004, as China’s demand is expected to increase by at least 10% to 6.2 to 6.3 million tons. The price of PVC will also increase significantly. Interestingly, South Korea’s production capacity has only moderately improved. There are some projects that remove bottlenecks and improve efficiency. For example, LG Chemicals completed the debottlenecking of its styrene monomer production line and increased its production capacity by 120,000 t/a in December 2003. It is expected that PVC production companies outside China will have a good time. This is because two-thirds of China's PVC producers use calcium carbide production technology. China's lack of electricity and coal prices have led them to reduce production and thus increase the import of PVC. demand. The polyester and ethylene glycol production companies will also operate well. After China's accession to the WTO, the United States will lift its import quota restrictions on China, so China's textile exports may more than double. Asia's polyester and ethylene glycol markets will be extremely scarce and many companies will benefit from them. The Korean chemical company has two favorable factors. First, the US dollar continues to depreciate. Second, China will be even more deficient in energy. This will cause China to import more basic chemicals and may postpone some expansion projects. One unfavorable factor is that crude oil production in non-OPEC countries may increase sharply and thus lower the price of crude oil. This will cause downstream oil buyers to adopt a wait-and-see attitude, which will be detrimental to product prices.
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