SEOUL, KOREA - Some petrochemical raw materials such as urethane are reported to be in oversupply. Korean petrochemical producers have expanded their capacities since a few years ago in anticipation of a rapid rise in demand from emerging markets including China, but actual demand is falling short of expectations.

 

 

According to industry sources on May 11, as many as 2.4 million tons of additional capacity in propylene oxide will come on stream by 2017 in Asia alone including China, Japan, the Middle East, and Korea. This is equivalent to about 70 percent of Asian output (3.46 million tons) last year. Propylene oxide is an organic compound used to produce polyurethane, the base material for auto interior applications, home appliances, and insulators.

 

The domestic propylene oxide market is dominated by SKC Corp., with other foreign suppliers such as Dow Chemical, BASF, Shell Global, and Lyondell accounting for the remaining shares. SKC plans to expand its Ulsan plant's capacity to 610,000 tons from current 310,000 tons a year. To this, other domestic producers such as GS Caltex, Samsung Fine Chemicals, and Hanwha Chemical will join the fray, leading to worries of overcapacity.

 

An industry official commented, "If all capacity expansion plans announced by Chinese makers and others are realized as intended, the total propylene oxide capacity in Asia will be in excess of 1 million tons a year by 2017, which is way more than the demand."