EIS RESEZAICH PAPER N E 10 for FOREIGN FIRMS Bridget
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EIS RESEZAICH PAPER N e 10 SOUTH _KOREAN CFENICAL INDUSTRY OPPORTUNITIES FOR FOREIGN FIRMS Bridget SPRECKLEY Octohcr 1983 1 ct 3 "RS SOUTH KOREAN CHEMICAL INDUSTRY OPPORIUNITIES FOR FOREIGN FUNS Bridget SPRECKLEY EURO-ASIA CENTRE Fontainebleau October 1983 Copyright 6D I Overview of the South Korean Chemical Industry A Heavy Chemicals B Fine Chemicals II Analysis of three sectors identified as holding best opportunities for foreign firms A Pharmaceutical industry B Agrochemical industry C Cosmetic industry III Information important to prospective importers, licensors and investors in South Korea. A Selling and investment guidelines B Government supported research and development C Investors assessments Sources and References I OVERVIEW OF THE SOUTH KOREAN CHEMICAL INDUSTRY A HEAVY CHEMICAL INDUSTRY Koreas heavy chemical industry is plagued by the absence of domestic raw materials and by the overcapacity of large dedicated plants common to the industry internationally. The profits (EBT) in industrial chemicals fell by a factor of 2.8 from 81-82. An initial brief discussion of the inorganic and petrochemical industries will indicate that opportunities for foreign firms are largely restricted to the sale of their cheaper bulk chemicals through the international commodities trading systems. However, a few niches exist in areas where a foreign firm could invest and use its more specialised technological base to develop a temporarily protected local industry. The Korean fertiliser industry is depressed, 1982 productions of the big manufacturers was at less than 50% capacity following a trend of reduced production which started in 1980. Exhibit (I) shows the manufacturers and their capacities with the production tonnage for the different formulation components. Fertilisers are all bought by the government through the National Agricultural Coopertives Federation and distributed to end users at set prices. In 1980 there was a 20% slump in domestic demand due to a cut in this government subsidised supplying. However, the present local usage is unlikely to rise beyond the recovered level as Korea is already amongst one of the very highest appliers of fertilisers in the world. This excess capacity of the industry was therefore intended for export. Although the 1982 exports still stood at 1.17 mT, it seems unlikely that this can be sustained as now factories in India, China and the USSR reduce the competitivity of the Korean product. The .48 mT of fertilisers imported consist largely of potassium fertilisers - far cheaper abroad. The government undertook a restructuring of the industry in Spring 82 closing the two plants and merging others. One of the plants shut down was that of Kyungi Chemical, an enterprise in which two Japanese companies (one of them Mitsubishi chemical) had invested $3.3m. Resins, being used in the construction industry, are also elements of a key export industry. Due to the limited availability of quality and specialised resins domestically we see both high imports and exports and an industry also not operating at high capacity. There is thus a considerable import market for quality resins. The Korean government is at present particularly concerned about the under-utilisation of Koreas petrochemical base, and is trying to develop the trees of intermediaries which would change this situation. It would clearly be economic nonsense for a foreign firm to become involved in the development of an analine or a propylene plant with markets of 3 and 14 th tons p.a. respectively. However, given this governmental position, it could be interesting for a firm to invest in the manufacture of higher value added speciality petrochemicals - ones which are components of a Korean export drive - and use this activity as an export base for the East Asia Region. Major foreign investments in this sector to date are indicated in Ex (VI) and the process column Exhibit VIII) indicates as well the other technological transfers which have taken place. EXHIBIT (I) FERTILISERS 1982 Production by formulation Component /TPA Name (and ownership) Capacity/TPA N P K Korea General Chemical Corp Urea 231 000 106 260 Yong Nam Chem Co Ltd (KGCC) U 55 300 25 483 C 358 000 65 308 100 061 43 278 Chinhae Chem Co Ltd U 84 100 38 686 (KGCC and Gulf Oil and Int C 180 600 33 280 500 70 21 667 Mineral Corp) Korea Fertiliser Co Ltd U 330 000 151 800 C Namhae Chemical Corp U 595 000 273 800 C 700 000 102 000 200 000 112 000 (75% KGCC 25% Agrico US) Chosun Fertiliser Co Inc C 75 000 Other (eg Hankook Caprolactam Misc 391 900 33 600 45 600 (eg (NH4)2504) 830 200 395 700 176 900 TOTAL 3 000 000 1,402,800 Compiled from Korea Fertiliser Industry Association Minister of Agriculture Industry sources EXHIBIT (III) PETROCHEMICAL COMPLEXES IN KOREA ULSAN PETROCHEMICAL COMPLEX LOPE (KPCC) 50,000 MT/yr Refinery HDPE (KPIC) 280 th b per day Ethylene 70,000 (YUKONG) 155,000 MT/yr VCM (KPCC) 60,000 PVC (K. Plastic) 205,000 Ethanol (K. Gen. Chem.) 30,000 Acetaldehyde (K. Gen. Chem)) 24,000 Styrene (Ulsan PetChem) 80,000 Polystyrene (Hannam Chem) 146,500 Naptha Cracker Polystyrene (Hyosung BASF) 20,000 (YUKONG) Polypropylene (KPIC) 105,000 Propylene Acrylonitrile (Tong Suh PC) 77,000 81,000 PPG (K. Polyol) 20,000 Butadiene SBR (Korea S.R) 100,000 24,000 NCB Petroleum Resin (KOLON PC) 10,000 21,200 Cyclohexane (KOCO) 36,000 Benzene Caprolactam (Hankook Capro) 33,000 56,000 Alkyl Benzene (E Soo Chem) 33,000 BTX Extr Toluene Maleic Anhydride (Dai Nong PC) 10,000 (YUKONG) 72,000 Xylenes 88,000 0-Xylene Pthalic Anhydride (Sam Kyung C)38,400 30,000 P-Xylene TPA (Sam Sung PetChem) 160,000 119,000 Exhibit (III) (cont) YEO-CHON PETROCHEMICAL COMPLEX Electrolysis Caustic Soda 227,000 Refinery (Hanyang MT/yr 380 th b Electro) per day (Honam Oil Chlorine L D P E (KPCC) 100,000 Refinery) 210,000 MT/yr Naptha H D P E (Honam PetChem) 70,000 Ethylene 350,000 E D C (KPCC) 286,000 Naptha Cracker V C M (KPCC) 150,000 (Honam Ethylene) P V C (Lucky) 150,000 Ethylene Glycol (Honam PC) 80,000 P P (Honam PetChem) 80,000 Propylene 187,000 Octanol/Butanol (K. Gen C) 55,000/ 10,000 A B S (Lucky Ltd) 20,000 Butadiene 50,000 (Korea SR) B R (Korea SR) 25,000 Benzene Cumene (Kumho chem) 35,000 74,000 BTX Extr. Toluene Phenol (Kumho Chem) 25,000 44,000 Acetone (Kumho Chem) 15,000 Xylene Ulsan T D I 10,000 (Chinyang Fine Chem) Carbon Black 94,000 (Lucky Continental) Methanol 330,000 (Taesung Methanol) KPCC Korea Pacific Chemical Corp (50/50 Dow and KEG) KPIC Korea Petrochemical Industry Co (50% Marubeni) K Plastic Korea Plastic Industry Co (Korean Explosives) KGCC Korea General Chemical Corp (Public capital) Ulsan P.Chem= (Korean Dev Bank 37%, Miwon 25%, Hankook Fertilisers 38%) Hannam Chem = (Miwon Group) Tong Suh (Hanil Synth Fibre and Asahi) Pchem K. Polyol = (Toyo Menka 45%, Chin Yang 36%) Korea SR Korea Synthetic Rubber, (Kumto) Dal Nong (Mitsui Toatsu Chem Inc, Tokyo Menka Kaisha, Dai Nong) PChem Sam Kysung = (Mitsubishi, Aekyung) Samsung (Samsung 50%, Amoco Chems 35%, Mitsui PChem 15%) PChem Yukong ex KOCO (W Gulf Oil) now Sunkyong control. Honam Oil = (Lucky and Caltex) Honam (Daelim Ind Co 80%, Lotte 20%) K Steel (Daewoo) Chem EXHIBIT (IV) NEW COMPETITORS IN PETROCHEMICALS ETHYLENE 1000 MT/YR Time of Start-up Australia 500-600 85 Indonesia 350 83 Singapore 300 83 Saudi Arabia 1100 85 Quatar 250 84 TOP KOREAN PETROCHEMICALS EXPORTS Product MM$ PVC 104.6 HDPE 26.7 PP 26.3 PS 16.7 LDPE 10.1 Source : Korean Society of Chemical Engineers EXHIBIT (V) SUPPLY AND DEMAND IN PETROCHEMICALS IN SOUTH KOREA 1982/Metric Tons per year Production Import Export SSR Capacity Plans (shipment) % Utilis- to a b c * ation increase industry capacity (Delayed as part of new complex) Feedstocks Ethylene 375,838 - - 100.0 74 Propylene 224,877 25,664 - 899.0 84 Butadiene 61,682 299 9,572 117.7 83 Benzene 89,902 9,216 3,264 993.8 69 +84000for July 85 Toluene 115,631 5,816 5,624 99.8 97 + 172000 Xylenes 129,413 65,595 1,176 70.0 109 +213000 0-xylene 25,129 10,672 70.2 84 P-xylene 83,492 42,591 33,078 89.8 70 Cyclohexane 34,540 100.0 96 RMs (partly for resin) Propylene oxide - 14,184 - 0.0 Ethylene dichloride 110,009 30,994 - 78.0 38 Vinyl chloride monomer 156,854 165,940 502 48.7 74 Styrene 64,924 53,591 965 55.2 81 Acetaldehyde 8,220 - - 100.0 33 Resins Low density polyethylene 104,870 38,687 10,698 78.9 69 High density p.ethylene 120,162 9,159 26,476 116.8 86 Polypropylene 162,533 21,978 26,307 102.7 88 Poly vinyl chloride 306,719 1,719 118,108 161.1 86 +1,110000 Polystyrene 71,911 2,850 16,753 124.0 43 + 50,000 Acrylonitrile butadiene 29,558 2,380 8,179 124.4 107 +50,000 styrene resins RMs (partly for fibres) Acrylonitrile 41,872 122,177 25.5 54 Caprolactam 42,024 83,356 33.5 127 Terephtalic acid/ 154,999 152,271 50.4 97 dimethylterepthalate Synthetic Fibres Nylon 117,620 8,020 906,90 337 95 Acrylic 150,620 6,080 128,920 542 65 Polyester 327,710 22,560 300,410 657 60 Polypropylene 2,420 80 1,430 226 21 PVA 3,990 3,990 0 Others 3,540 3,540 0 kL, Elastoners Styrene butadiene rubber 48,753 8,546 2,125 88.4 49 +5000 under construc- tion (SBR Latex) Butadiene rubber 15,681 7,060 1,738 74.7 62 Isobutyl isoprene rubber 15,547 0 Others Ethylene Glycol 79,900 52,262 420 59.7 na Carbon Black 58,293 3,229 1,316 96.8 47 Ackyl benzene 12,761 548 418 99.0 39 Methanol 103,443 61 6,001 106.1 31 Pthalic Anhydride 39,230 23 6,350 119.2 58 Moleic Anhydride 10,213 - 7,496 373.1 102 Polypropylene Glycol 13,111 168 - 98.7 52 Petroleum Resin 7,393 297 3,945 197.4 74 Phenol 15,105 4,059 8,359 139.8 60 Acetone 8,749 920 1,007 101.0 58 Toluene Diisocyanate