South Korea's petrochemical industry is facing major challenges due to declining population and the need to boost exports. The country's potential growth rate is estimated to decline to 1.7% in 2024, largely due to its low fertility rate of 0.72 in 2023. Petrochemicals, combined with refining, are South Korea's fourth-largest export sector. However, the country needs to be prepared for the possibility of greater self-sufficiency in petrochemicals in China.
China aims to have 40% of vehicles on its roads be electric by 2030 and achieve carbon neutrality by 2060 [936bf45b]. This could potentially impact the availability of feedstocks from local refineries, but it is believed that refineries will be increasingly turned into petrochemicals feedstock centers. China has capped its refinery capacity from 2027 to 2040, but more naphtha and gasoil crackers are expected to be added to refineries before the 2030 cut-off point. China's closer geopolitical relationships with the Middle East and increased availability of natural-gas liquids suggest that imports of feedstocks will be available at the right costs [936bf45b] [519eee50].
The South Korean government is discussing short-term measures to restructure the petrochemicals industry, including the potential consolidation of the refining-petrochemicals sector. South Korea can also focus on the growing circular economy and lower carbon markets. Transitioning to sustainable energy, refining, and petrochemicals is seen as a viable option based on the country's history [ICIS] [b9e029b4] [3f99e309].
China's closer geopolitical relationships with the Middle East and increased availability of natural-gas liquids suggest that imports of feedstocks will be available at the right costs. The author predicts annual average petrochemicals consumption growth of 1-3% per year until 2030, with growth falling to around 1% beyond 2030 due to demographic challenges and a declining population. Recycling in China will increase the country's self-sufficiency in polymers, and local petrochemical plants will run at high operating rates to guarantee local supplies of raw materials. The author concludes that China will become entirely self-sufficient in petrochemicals and suggests that overseas producers focus on other markets [936bf45b] [519eee50]. China's chemicals producers are shifting towards being more nimble and agile, focusing on producing chemicals and polymers when it makes economic sense. The emphasis is on supplying chemicals for higher-value downstream industries such as electric vehicles and batteries. Local intermediate chemicals are increasingly competitive with imports, and customers value reliable suppliers who can provide a wider range of grades and technical services. China is expected to become self-sufficient in commodity grades of polyethylene, polypropylene, paraxylene, and ethylene glycols by 2030. The country could become a major exporter of specialty chemicals and composites to the developing world, while its exports to the West may face challenges due to more sophisticated markets [519eee50].
