MOSCOW (MRC) -- South Korea’s purified terephthalic acid (PTA) producers have been urged to reduce production by 30% amid worsening market conditions, according to the government’s industrial restructuring plan.
The country’s petrochemical industry is one of the five industries that was recommended by the government to undergo restructuring, along with shipping, shipbuilding, steel and construction sectors.
Since October 2015, the South Korean government has been pushing ahead with its plan for restructuring industries that have suffered from macroeconomic uncertainty including the slowdown of the Chinese economy and the US Federal Reserve’s interest rates hike.
Against this backdrop, South Korea’s petrochemical industry was seen severely affected by China’s growing self-sufficiency for petrochemical products over the last couple of years, as it directly led to lacklustre exports.
In particular, the country’s PTA makers, once one of the world’s biggest producers and exporters, have encountered stiff competition due to a series of mega-PTA plants that started up in China in recent years.
As such, South Korea’s PTA makers have been suffering from operating loss since 2012, and the cumulative deficit over the last four years is estimated to be at USD747.53 million (KRW 845 billion), according to the Financial Services Commission.
The global oversupply of PTA is likely to sustain and the country’s competitors have already taken steps to reduce the production.
For instance, Japan’s PTA makers are expected to reduce production by 1.2 million mt this year, while Taiwan’s China American Petrochemical Co. (CAPCO) had scrapped its 800,000 mt/year of PTA plant in March 2015.
"Following a series of meetings with PTA producers, we have reached a conclusion that the oversupply issues will persist until 2019-2020, weighing on demand growth," said Mr Kim Yong Bum, Director of the Financial Services Commission.
Consequently, as part of the restructuring plan, the government will encourage PTA makers to reduce production by 30% or 1.5 million mt via voluntary reduction or scrapping of the existing facilities.
As MRC reported earlier, in August 2015, The Ministry of Commerce, Government of China, announced it would review anti-dumping duties on PTA imported from South Korea and Thailand. Anti-dumping duties ranging between 2 and 20.1% were imposed on PTA imports from these two countries in August 2010, for a period of five years. The ministry's decision to review these duties follows an application made by domestic producers in June last year requesting the ministry to reinvestigate the case and extend the duties which were due to expire.