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

1. But First Sinopec's additional plan raises global oversupply concernschina plans to add petrochemical capacity again from next year, a move that is expected to further exacerbate the global oversupply of petrochemical items. while there has been a recent view that the Chinese government's economic stimulus policies might alleviate the expected oversupply issue, 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 Delayin the petrochemical addition cycle starting in 2020, some investment plans were delayed or is able toceled due to the poor performance of the sector in 2022- 2023. In particular However, NH Investment Securities is worried that if petrochemical production capacity is expanded on a substantial scale again from next year, the global petrochemical product operating rate will drop by an average of 10%, which will further exacerbate the oversupply situation. Analysis of 3. And Ethylene and PE Production Increaseaccording to S & P data, ethylene, as the "manufacturing rice" of the petrochemical sector, is expected to add about 2. And 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 to 49%. Petrochemical items such as ethylene and PE are the main items of the South Korea petrochemical sector, and their increase in production will immediately affect the export and performance of South Korea petrochemical companies. 4. SINOPEC Self-sufficient Impact on South Korea Petrochemical Exportwith the rapid research of China's petrochemical sector, China has successfully achieved self-sufficiency in petrochemical items. China's ethylene self-sufficiency rate has reached 95. 6 percent this year, approaching 100 percent, according to the China sector Information Portal Mysteel. From what I've seen, This change has put the export path of South Korea petrochemical companies in trouble. Based on my observations, According to the South Korea Petrochemical Association, domestic petrochemical companies accounted to 36. 3 percent of exports to China last year, down 6. 6 percentage points from 42. 9 percent in 2020. And 5. In fact South Korea Petrochemical sector: Challenges and Prospectsfaced with the rapid research of China's petrochemical sector and the realization of self-sufficiency, the South Korea petrochemical sector is facing severe challenges. Cui Yingguang, analyst at NH Investment Securities, pointed out that the South Korea petrochemical sector will face a difficult business ecological stability in 2025 due to the renewed increase in supply burden and reduced demand expectations. Therefore, South Korea petrochemical companies need to actively adjust their strategies and find new export markets and development points to cope with the competitive pressure from China's petrochemical sector.