Product Margins Plummet as Asian Manufacturers Rush into Petrochemical Capacity Expansion

Petrochemical products such as Ethylene have witnessed a staggering dip in their prices dropping to an all-time low and leaving the petrochemical industries with lower margins on petrochemicals. China’s 100 per cent Paraxylene self-sufficiency has adversely affected the South Korean companies. The country’s Ethylene market became conservative, majorly affecting the price of downstream products, which includes Polyethylene, Ethylene Dichloride etc. It has been estimated that China will elevate its Paraxylene production to around 12 MMT by the end of the year. Establishment of new petrochemical plants across Asian countries will further route Paraxylene towards price-cut. This has caused a significant reduction in profit margins for petrochemical producers. The trade agreement between China and United States is unlikely to improve market situation for South Korea. It is being expected that situation will remain lacklustre until the recovery in the construction and automobile industry in the country. After spectating the circumstances, LG Chem, a major South Korean petrochemical manufacturer is likely to lower its capacity utilization, thereby bringing down the production output. Similarly, other South Korean petrochemical companies are lowering their capacity utilization by about 20 to 30 per cent to face the situation of oversupply in the region squarely.