South Korean Seeks Petrochemical Restructuring : The government is seeking corporate restructuring of the petrochemical industries, urging local companies to “voluntarily reorganize” their businesses.
However, the move has been drawing corporate opposition that the demand is based on foreign research irrelevant to local market circumstances and will only deteriorate the companies’ competitiveness.
Trade, Industry and Energy Minister Joo Hyung-hwan held a meeting with the heads of petrochemical firms. “The firms should preemptively streamline their businesses to cope with tough competition,” he said at the meeting.
The remark came after local petrochemical associations commissioned a consulting firm to come up with industry-wide restructuring plans. The firm, Bain & Company, pointed out the supply glut of petrochemical products.
Bain & Company, which conducted a study on the petrochemical industry, pointed out that companies should downsize production of terephthalic acid (TPA) and polystyrene, while additional increases in facilities making butadiene rubber and polyvinyl chloride (PVC) should be stopped.
Domestic firms’ TPA exports reached USD 4.4 billion in 2011, but plunged to USD 1.4 billion last year, as China increased supply to meet its own demand. Polystyrene’s profitability will likely decrease amid severe price competition, according to the consulting firm. The report also suggested companies upgrade their butadiene rubber and PVC facilities to ones making high value-added products.
However, industry insiders cast doubts on the report, saying cutting down the supply of specific products will aggravate the entire petrochemical industry because one product can be an ingredient to others.
“The move can affect short-term sentiment, but it seems to be difficult to bring a structural turnaround, because China is already experiencing an oversupply,” said an analyst at Hana Financial Investment.
The government will announce its schemes for restructuring the petrochemical industries on Friday (30 Sept 2016) and the consulting firm’s opinions are anticipated to affect the government’s plan heavily.
The government will finish reorganizing the petrochemical sector by 1st half of next year. “A large number of companies expressed …….
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