Analysis of the impact of Sinopec's production increase on the South Korea petrochemical industry

1. Sinopec's additional plan raises global oversupply concerns

china plans to add petrochemical capacity again from next year, a move that is expected to further exacerbate the global oversupply of petrochemical products. Although there has been a recent view that the Chinese government's economic stimulus policies may alleviate the expected oversupply problem, most analysts believe that this expectation is too optimistic. The latest report of NH Investment Securities points out that from 2025 to 2027, the scale of global petrochemical expansion will be expanded again with China as the center, which will undoubtedly have a profound impact on the global petrochemical market.

Impact of

2. Petrochemical Addition Cycle and Investment Delay

in the petrochemical addition cycle starting in 2020, some investment plans were delayed or canceled due to the poor performance of the industry in 2022-2023. However, NH Investment Securities is worried that if petrochemical production capacity is expanded on a large scale again from next year, the global petrochemical product operating rate will drop by an average of 10%, which will further aggravate the oversupply situation.

Analysis of

3. Ethylene and PE Production Increase

according to S & P data, ethylene, as the "industrial rice" of the petrochemical industry, is expected to add about 2.54 million tons of production capacity in the period 2025-2027, of which 61% is concentrated in China. In addition, the additional amount of plastic material PE is expected to be about 1.76 million tons, of which China will account for 49%. Petrochemical products such as ethylene and PE are the main products of the South Korea petrochemical industry, and their increase in production will directly affect the export and performance of South Korea petrochemical enterprises.

4. SINOPEC Self-sufficient Impact on South Korea Petrochemical Export

with the rapid development of China's petrochemical industry, China has successfully achieved self-sufficiency in petrochemical products. China's ethylene self-sufficiency rate has reached 95.6 percent this year, approaching 100 percent, according to the China Industry Information Portal Mysteel. This change has put the export path of South Korea petrochemical companies in trouble. According to the South Korea Petrochemical Association, domestic petrochemical companies accounted for 36.3 percent of exports to China last year, down 6.6 percentage points from 42.9 percent in 2020.

5. South Korea Petrochemical Industry: Challenges and Prospects

faced with the rapid development of China's petrochemical industry and the realization of self-sufficiency, the South Korea petrochemical industry is facing severe challenges. Cui Yingguang, an analyst at NH Investment Securities, pointed out that the South Korea petrochemical industry will face a difficult business environment in 2025 due to the renewed increase in supply burden and lower demand expectations. Therefore, South Korea petrochemical enterprises need to actively adjust their strategies and find new export markets and growth points to cope with the competitive pressure from China's petrochemical industry.