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AsiaPetrochemicalIndustryConference2014

May15~16,2014

Thailand

CountryReport

From

KOREA

KoreaPetrochemicalIndustryAssociation(KPIA)

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C O N T E N T S

Ⅰ. Country Report ·························································· 5

Ⅱ. For Committee Meeting ········································· 21

1. General Matters & Raw Materials Committee ····· 22

2. Polyolefins Committee ··············································· 31

3. Styrenics Committee ·················································· 37

4. PVC Committee ···························································· 41

5. Synthetic Rubber Committee ··································· 45

6. Synthetic Fiber Raw Materials Committee ········· 49

7. Chemicals Committee ················································· 57

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Ⅰ.CountryReport

2014 Asia Petrochemical Industry Conference - Korea

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Review of Korean Petrochemical Industry and Its Prospect

1. Review of Korean Economy and Prospect

The Korean economy in recent days has shown stable trend in

employment and price aspects while having the increase in production

in entire fields of mining industry, service industry, construction

industry, public administration and so forth.

However, the recovery in the private sector in investment and so

forth has yet to be solidified and there are external risk factors

co-existing with the US's quantitative easing risk, unstable emerging

countries, weakening of Yen, slowing down in economic growth of

China and so forth.

Under such a situation, the GDP growth rate of this year (announced by

the Bank of Korea in January 2014, hereinafter the same) will be 3.8% (3.9% in the first

half → 3.7% in the second half) that is expected to be higher level than the last

year (2.8%).

The private consumption is expected to make solid increase with

the increase in purchase power following stable oil price and decline in

exchange rate while the facility investment will show relatively active

increase with the recovery in export and turning around from

lackadaisical economy up to the point in the signs of recovery.

Overall export in Korea is expected to expand the increase

compared to the previous year thanks to the recovery trend of global

economy, but it is likely to encounter difficulty in making substantial

increase due to the slow growth in newly emerging markets, as the

main export markets for Korea, as well as decline in exchange rate.

Country Report

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<Review of major indices of domestic economy and its prospect (unit: %)>

2013

2014

First half Second half Annual

KIET BOK LGERI KIET BOK LGERI KIET BOK LGERIGDP 2.8 3.7 3.9 4.0 3.6 3.7 3.5 3.7 3.8 3.7

Private consumption

1.9 3.4 3.4 3.0 3.2 3.4 2.8 3.3 3.4 2.9

Construction investment

6.7 2.9 3.5 1.2 1.8 0.0 1.7 2.3 1.6 1.5

Facility investment

▼1.1 6.5 8.0 8.5 4.5 3.7 3.6 5.5 5.8 6.0

Note: 1. Fluctuation rate compared to the same term of the previous year

2. LG Economic Research Institute (LGERI) (Dec. 2013)

3. Korea Institute of Industrial Economics and Trade (KIET) (Nov. 2013)

4: Bank of Korea (BOK) (Jan. 2014)

2. Review of Petrochemical Industry and Prospect

[Review of 2013]

In 2013, the D/S of domestic petrochemical (based on 3 major

fields) was expected to be 21.83 million tons, an increase of 2.2%

compared to the previous year while demand was expected to be

10.79 million tons, an increase of 1.7% compared to the previous

year.

Notwithstanding the increase of production in synthetic resin and

increase in operation rate, production was increased with limitations

due to the excessive supply following large-scale capacity addition in

the region for synthetic fiber raw materials.

In spite of slow down in external industry status, decline of

exchange rate in the second half (1H 1,104 Won/Dollar, 2H 1,085

Won/Dollar), and deepening competition of exporting countries, export

showed an increase of 2.5% compared to the previous year but the

synthetic fiber raw material was turned around to declining trend with

the drastic progress in self-efficiency in China (a decline of 5.6%


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compared to the previous year). The domestic demand was shown to

make only 1.7% of growth compared to the previous year because of

the impact in reduction of fiber and tire production.

Review of supplies for 3 major fields (Unit: 1,000 tons)

(Data) KPIA (Note) Production is based on sales

[Prospect of 2014]

In 2014, the D/S of domestic petrochemical (based on 3 major

fields) is expected to be 22.35 million tons, an increase of 2.4%

compared to the previous year while demand is expected to be 11.13

million tons, an increase of 3.2% compared to the previous year.

Production lacks new major investment, but it is expected to have

no loss in additional operation from increase of operation rate for

capacity increase, schedule to implement routine maintenance repairs in

the previous year level and others. For new capacity project, there are

EO/EG (40/150, Korea Petrochemical Ind. Co., Ltd., '14.2H), EVA

Country Report

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(200, Samsung Total, ‘14.1Q) and others.

Export is expected to make an increase with the improvement in

export economic conditions, lack of major new capacity addition in the

region, intensifying routine maintenance in spring from major exporting

countries (Taiwan, Japan and others). However, The export of synthetic

fiber raw material that China is quickly moving toward self-efficiency still

encounters difficulty to expect high increasing trend yet.

Domestic demand is likely to make growth in the level of previous

years with the improvement in domestic demand for consumption,

investment and others thanks to the recent economic recovery, such

as, increase in domestic economic growth rate, increase in operation

rate for the frontline industries, such as, automobile, home appliance

and so forth. With the upward adjustment in domestic GDP growth rate

(expect for 3.8% increase with 1.0%p compared to the previous year, the BOK)

following the improvement in major economic indices for recent private

consumption, investment in facilities and construction, export and

others. For some items that are sensitive to the economy, it is

forecasted to have the increase thanks to the increase in production

following the prospect of economic recovery in advanced countries as

well as the base effect of the previous year.

<Trend of fluctuation rate on demand for each year in 3 major fields>

(Data) Korea Petrochemical Industry Association


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Trend of fluctuation rate on demand for each year in 3 major fields (Unit: 1,000 tons)

(Data) KPIA

Country Report

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□ Trend of Demand and Supply for each Field

(1) Synthetic resins

[Review of 2013]

In 2013, the D/S of the domestic synthetic resin for production

was 12.73 million tons, an increase of 6.4% compared to the previous

year while the demand was 5.44 million tons, an increase of 6.0%

compared to the previous year.

Review of demand and supply of synthetic resin and prospect (Unit: 1,000 tons)


Production was shown to increase with the expansion of

production for HDPE (new capacity addition) and LDPE (facility

improvement), increase of operation rate from export to China in some

products, reduction of routine maintenance and others.

Looking into the operation rate for each key product, LDPE

(annual average of 101%, previous year for 8%p↑) and ABS (annual

average of 86%, previous year for 8%p↑) are at the level higher than

other products while PS (annual average of 80%, previous year for

2%p↓) and PVC (annual average of 87%, previous year for 3%p↓)

showed a decline compared to the previous year due to the influence

of reduction in external export of China and others. For a reference,

the LDPE operation rate was 99.1% in January, 100.7% in March,


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101.5% in May, 102.8% in July,

99.1% in September, and

109.9% in November. The ABS

operation rate was 89.7% in

January, 84.2% in March, 87.5%

in May, 83.8% in July, 86.3% in

September, and 80.6% in

November. PS (including EPS)

recorded 66.3% in January,

82.8% in May, 82.3% in July,

81.9% in September, and 79.1%

in November.

Notwithstanding the advancement of China in the market for the

low priced products from Middle East, export showed steady increasing

trend with the sound export of PE and PP to China and Asian

countries, sustaining of share rate and others. However, the export of

PVC and PS that have China advanced for self-efficiency is shown to

decline compared to the previous year.

The domestic demand has shown an increase from expansion of

production and sales for quasi-durable goods (shoes, bags and

others) including home appliances as important durable goods. The

production index of the plastic industry has shown steady increasing

trend since the early part of the year, and with the showing of

increasing trend for each month in major home appliances of

refrigerator, washer and air-conditioner, the production amount in

October 2013 showed an increase of 42.1% compared to the previous

year, or 1 trillion 166.2 billion won. For a reference, accumulated

production amount of October 2013 of major home appliances

(refrigerator, washer and air-conditioner base) was shown for 9 trillion

780.5 billion won (an increase of 12.0% compared to the previous

year).

Country Report

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Production index for domestic rubber and plastic industry (2013)

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov.

Production index 109.0 95.9 110.7 112.8 113.6 111.8 110.7 99.1 99.1 115.5 110.4

Seasonal adjusted index

110.0 110.9 108.2 109.2 108.7 109.4 108.2 103.6 103.6 107.2 106.0

Ratio of same month of the

previous year

14.7 -6.6 1.8 7.3 4.7 -0.2 2.9 -7.9 -7.9 2.4 -1.5

Ratio to previous month

3.0 0.9 -1.5 1.0 -0.6 0.1 -0.7 -4.9 -4.9 4.3 -3.2

Accumulated

ratio to previous

year

14.7 3.6 2.8 3.9 4.1 3.5 3.3 3.4 2.1 2.1 1.9

(Data) National Statistics Office (Note) 2000 = 100%

[Prospect of 2014]

In 2014, the D/S of domestic synthetic resin is expected to be

13.21 million tons, an increase of 3.8% compared to the previous year

with the demand to be 5.63 million tons, an increase of 3.5%

compared to the previous year.

Notwithstanding the operation of new capacity addition in one

case, production is expected to increase thanks to the expansion of

domestic demand and sales as well as maintaining high operation rate

for export. As for major capacity addition plan, Samsung Total is

expected for 200,000 tons of EVA.

Export is expected to continue its increasing trend with moderation

of competition following lack of new major facilities in the Middle East

and items (PE and PP) not targeted for self-sufficiency in China.

The domestic demand is likely to grow in the GDP growth level

due to the factors of improvement in overall growth for domestic


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demand, such as, consumption, investment and others as well as

increase in recovery for production and export in pertinent frontline

industry. For a reference, according to the economic prospect of the

BOK (announced in January 2014), the economic growth rate of 2014

will show the high 3% range (compared to the same term of the

previous year) to continue the growth rate in the level of potential

growth rate. In addition, for the case of automobile industry, one of

the key front industries, production is expected to increase 2.7%

compared to the previous year due to the improvement in export effect

and production condition while information communication devices will

make to 4.8% around smart phone or components. And, display is

expected to grow 2.3% by breaking away from the “-” in the previous

year (KIET, Economic and Industrial Prospect in 2014).

(2) Synthetic Fiber Raw Materials

[Review of 2013]

In 2013, the D/S of domestic synthetic fiber raw materials recorded for

8.06 million tons, a decline of 4.0% compared to the previous year with

demand recorded 4.92 million tons, a decline of 2.3% compared to the

previous year.

Review of demand and supply of synthetic fiber raw material (Unit: 1,000 tons)


Production has experienced its reduction for slow down in

Country Report

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production following the downward adjustment of operation rate due to

the excessive supply in the region that was caused by new capacity

projects of China for TPA, CPL and others.

The operation rate showed

worsening trait for profit with the

low rate of operation around

80%, a break-even point in most

of products. For a reference, the

TPA operation rate showed

80.2% in January, 75.2% in

March, 76.9% in May, 78.2% in

July, 83.0% in September, and

81.4% in November.

Export influenced on declining trend for overall export of synthetic

fiber raw material (2 consecutive years of declining trend) due to the

reduction of export to China for the largest export item in synthetic fiber

raw material, TPA.

Thanks to the minus growth or stagnation in production and

export in the frontline industry of fiber field, the domestic demand was

shown to have the declining trend of demand inevitably. The

production for each major fiber (polyester, nylon, and acrylic based)

recorded for 1,461,000 tons, approximately 1% decline compared to

the previous year.

[Prospect of 2014]

In 2014, the D/S of domestic synthetic fiber raw materials is

expected to be 7.94 million tons, a decline of 0.1% compared to the


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previous year with the demand to be 4.95 million tons, an increase of

2.3% compared to the previous year.

Notwithstanding the impact of capacity addition in EG and normal

operation of existing facilities, production is expected to continue its

declining trend due to low rate operation following the worsening

external supply conditions for TPA and CPLM. As for major capacity

projects, Korea Petrochemical Ind. Co., Ltd. is preparing to operate

EO/EG (40/150) in the second half in 2014.

Export is expected to continue its declining trend mainly with the

items showing drastic progress of self-sufficiency of China and it is

likely to decline approximately 3% compared to the previous year.

For a reference, during 2013~2014, China is planning to newly

operate TPA for 24 million tons that TPA export is inevitable to decline

for some time and caprolactam (CPL) is expected to cause the supply

in the region and deepening of price competition as it is scheduled to

operate the new capacity addition for up to 700,000 tons this year in China.

For domestic demand, it is expected to convert into increasing

trend compared to the previous year with the market growth in SE

Asia, production increase of carbon fiber, new growth engine, and

others. The fiber production is expected to grow for 3.3% for the year

with 3.0% in the first half and 3.6% in the second half due to the

recovery of domestic demand and expansion of export increasing trend

(KIET, Prospect of Economy and Industry in 2014).

(3) Synthetic Rubber

[Review of 2012]

Country Report

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In 2013, the D/S of domestic synthetic rubber was 1.04 million tons,

an increase of 3.1% compared to the previous year with the demand for

420,000 tons, a decline of 2.2% compared to the previous year.

Review of demand and supply of synthetic rubber (Unit: 1,000 tons)


Production showed an increase in production volume with the new

capacity additions and facility improvement, but the operation rate

reflected the slow down in the industry with decline in sales price and

others to record 74%, a decline of approximately 3%p compared to

the previous year. As for major new capacity project, there was a

capacity addition of SBR 110,000 tons of Kumho Petrochemical

(simultaneous operation with NBR Latex, completed in Sep. 2012).

Furthermore, the operation rate of synthetic rubber reflected slow

down in domestic industry that it continued to operate, at lower

operation rate than the previous year in the second half.

Export was shown to increase compared to the previous year due to

the expanded export to SE Asia and India. The BR export to India recorded

43,000 tons up to November 2013, an increase of 86.7% compared to the

previous year based on the accumulation standard, from 23,000 tons in

2012. However, export to China recorded 89,000 tons, a decline of 10.1%

compared to the previous year based on the accumulation standard, due to

the progress in self-sufficiency of supply in China.


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The domestic demand was

declined compared to the

previous year due to the

reduction of production in tire

companies, lack of new vehicle

effect following no release of new

domestic models, and stagnated

export with the stagnation in

global automobile market. In

2013, the production of domestic

automobile tires (source: Korea

Tire Association) was 97.97

million, an increase of only 0.3% compared to the previous year.

[Prospect of 2014]

In 2014, the D/S of domestic synthetic rubber is forecasted to be

1.09 million tons, an increase of 4.8% compared to the previous year,

and the demand is expected to be 440,000 tons, an increase of

3.8% compared to the previous year.

Production is expected to be on the rise compared to the previous

year with the upward adjustment of the operation rate in accordance

with full operation of the new capacity addition and expansion of export.

The export is expected to continue its steady increasing trend with

the enlargement of import demand as the demand for tire exchange of

China is anticipated to be generated in full scale from 2014.

The domestic demand is expected to have increase of demand

with the production increase following the increase in replacement

demand for domestic demand of tire and recovery of export.

Country Report

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(4) Export

[Review of 2013]

In 2013, overall petrochemical export in 2013 recorded USD 48.4

billion, an increase of 5.4% compared to the previous year. As per

region, export was increased in China (8.4%), EU (26.8%), and

Southwest Asia (16.5%) while export was declined in the US (△

20.7%), Middle East (△5.3%), and Japan (△6.3%).

Based on the volume, it was increased 5.7% compared to the

previous year with intermediate raw materials (23.7%) and synthetic

resin (7.6%) leading the increasing trend while basic raw materials (△

4.9%) and synthetic fiber raw materials (△5.4%) showing significant

decline. For a reference, the export volume was surveyed for 30.8

million tons in 2013, an increase of 5.7% compared to the previous

year from 29.1 million tons in 2012.

Trend of Export of petrochemical product for each year

(Data) KOTIS


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[Prospect of 2014]

Export in 2014 is expected to be USD 50.3 billion, an increase

of 4.0% compared to the previous year. The oil price is expected to

see a slight decline with the increase of supply for non-OPEC crude

oil and slow down in demand factor, but the naphtha is expected to

increase the price due to the supply reduction and demand increase.

For a reference, the naphtha is likely to emerge the strengthening

factors, such as, possibility of reduction in operation rate following

the worsening margin for local and European petroleum companies,

increase of demand for naphtha following the influence of capacity

addition in new splitters in Asia, and so forth.

As for each item, notwithstanding the sustained slow down in

export of synthetic fiber raw materials, due to the increase of supply

in the region, import regulation and others, it is expected to have

moderate increase trend in overall thanks to the recovery trend in

export of synthetic rubber as well as sustained increase in export of

intermediate raw materials.

Country Report

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Ⅱ.ForCommitteeMeeting

1.GeneralMatters&Raw

MaterialsCommittee

General Matters & Raw Materials Committee

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1. Olefins (Ethylene, Propylene, Butadiene)

ITEM : Ethylene

1) The 2013 Results

The ethylene production was 8,321 Kton which was increased

approximately by 3.4% to the previous year and demand has shown

3.6% of increase as well, due to the increase of export of ethylene.

It shows that the export volume was over 1 MMT from 2012 the

reason why derivatives spread margin was negative and it was impact

on the trouble of derivatives.

Especially, HDPE plant of Daelim Industry that is producing 300KT

was shut down almost for 3 months from March, 2013. This accident

pushed YNCC to change ethylene surplus balance that could make

more exports than the expected. LG Chem which is located at Daesan

successfully started to produce new EVA (140KT) from September 2013

that makes total Korean demand increased than that of 2012.

2) The 2014 Forecast

In 2014, the domestic ethylene production will be almost same as

of 2013’s with 2 cracker T/A schedule from September to November.

However we are focusing on the change of derivatives expansion

2014 that is Samsung Total(EVA), SK(LLDPE, SM), and KPIC(EO, EG) by

almost 8.3% increase in demand. These capacity addition are almost

targeting at Chinese market, and the dependence on the Chinese market is

getting quite deeper. As ethylene producer has to cover the new domestic

demand, total Korean ethylene balance will be much tighter than 2013’s.


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ITEM : Propylene

1) The 2013 Results

In 2013, the propylene capacity increased to 6,841 Kton due to

the new operation of GS Caltex RFCC. But, domestic production

recorded same level of 2012 due to the lower operation rate of PP

Makers and weak demand.

Export of propylene maintained approximately 1,208 Kton while

import volumes doubled up to 434 Kton by expansion of AN unit(

Dongsuh PC, 245Kton ).


The domestic supply in 2014 is expected to stay at 6.643 Kton,

the increase of 1.1% compared to the previous year while domestic

consumption will be 5,582 Kton and export expected down to 1,061

Kton. The year-end capacity will be expanded to 6,911 Kton according

to new expansion of LG chemical plant.

ITEM : Butadiene

1) The 2013 Results

There was no expansion among Korean Butadiene makers in 2013

and export volume decreased by 21.7% due to the lull operating rate

of synthetic rubber plants in China. Domestic consumption was

increased by 3.9% that was mainly caused by new start up of Kumho

SBR plant in 1Q 2013.


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The domestic butadiene production will decline by 13.9% in 2014

due to T/A of 2 BD makers and export also shows consecutive

reduction. the domestic demand also will be shrunk by relatively low

operation of BR / SBR / ABS plants which is affected by overall low

overseas demand growth.

(Unit : 1,000MT)

2012 20132014

(Prospect)

Ethylene

Supply

Production 8,049 8,321 8,359

Import 131 145 280

Total 8,180 8,465 8,639

Demand

Domestic 7,095 7,351 7,962

Export 1,033 1,120 677

Total 8,128 8,471 8,639

Year-end Capacity 8,350 8,350 8,350

Propylene

Supply

Production 6,119 6,128 6,206

Import 243 434 437

Total 6,362 6,562 6,643

Demand

Domestic 5,347 5,362 5,582

Export 1,216 1,208 1,061

Total 6,563 6,570 6,643


Butadiene

Supply

Production 1,331 1,314 1,131

Import 359 382 220

Total 1,691 1,696 1,351

Demand

Domestic 1,421 1,477 1,283

Export 284 223 68

Total 1,705 1,699 1,351



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2. Aromatics(Benzene, Toluene, Xylene)

ITEM : Benzene

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 4,722 4,899 5,234

Import 173 65 75

Total 4,895 4,964 5,309

Demand

Domestic 3,329 3,466 3,503

Export 1,566 1,498 1,806

Total 4,895 4,964 5,309

1) The 2013 Results

With the increase in operation rate following the new capacity

addition of MDI, SM and other D/S (demand and supply) and increase

in SM demand, the BZ demand was increased and the spread was

improved (compared to 2012, +116U$/MT). In particular, the BZ import

increase of China supported outstanding market status in the second

half. The export to the US by SE Asia has declined due to the BZ

supply increase following the worsening US phenol market status and

increase of operation rate of the refinery/reformer.


The BZ production is expected to increase in 2014 following the

new capacity project of the local PX plants, and with respect to the

D/S aspect, it is expected to have surplus of supply following the

supply decrease from the routine maintenance for SM/phenol and

lackadaisical market status for phenol and CPL in the first half.

Accordingly, the spread is likely to decline compared to 2013. Due to


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the import reduction with the prospect of increase in SM operation rate

of the US and expansion of BZ production by China, the export

increase to the US by Northeast Asia is expected.

ITEM : Toluene

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 3,188 3,109 3,171

Import 153 202 200

Total 3,341 3,311 3,371

Demand

Domestic 2,243 2,356 2,727

Export 1,084 955 644

Total 3,327 3,311 3,371

1) The 2013 Results

Due to the strong PX market status all year long, the TDP

operation rate had been maintained in high rate, and accordingly, the

TOL demand was increased. The demand for gasoline blending use

had steady growth in the 4% range in 2013, but it showed the trend

of steady increase as the feedstock for PX production in accordance

with the PX/PTA capacity addition. The Naph/TOL Spread of 2013

maintained high level of 250U$/MT.


The first half of 2014 is expected to have the supply to be long

with the influence of new capacity addition of reformer/cracket in

2013~ 2014 in China coupled with the reduction of demand for

gasoline in Japan to increase the TOL production among other things.


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In particular, following the operation rate for MX production demands

thanks to the decline in the PX economic feasibility, there is a showing

of TOL surplus with the increase in TOL production, and accordingly,

the spread has been reduced compared to 2013 (average of spread in

January - March is U$166/MT). The second half of 2014 is expected

to have the local TOL supply to be tightened due to the new capacity

addition of the PX plants.

ITEM : Mixed Xylene

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 6,628 6,316 7,235

Import 995 1,832 1,399

Total 7,623 8,148 8,634

Demand

Domestic 7,086 7,539 8,128

Export 624 609 500

Total 7,710 8,148 8,628

1) The 2013 Results

Notwithstanding the fact that CPC of Taiwan declining its MX

purchase volume, the spot volume for US MX excluding the term has

significantly decreased compared to the past due to the MX demand

from new PX plant S/U for Hyundai Cosmo, Dragon Aromatic of China

and others as well as no arbitrage between the US and Asia that the

overall MX supply has been tight. Due to the price structure that is

linked to the market situation for PX/PTA, the drastic price increase for

MX independently had certain restriction, but the PX has maintained

solid market status to enable MX to maintain stable spread of an

average of 300$ or more per year.


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The first half is expected to reduce the MX demand following the

decrease of PX operation rate from worsening PX/PTA economy and

suspension of MX increase/PX operation in Japan. In addition,

following the declining PX economy, the surplus MX of the PX

production companies is re-sold in the market that the balance of

surplus is expected to be expanded.

Thanks to the impact on new PX project operation in the second

half, it is expected to encounter tight situation for demand and supply,

but there is a probability of having the MC market status change in

accordance with the level of recovery in the PX-PTA market

ITEM : Para Xylene

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 5,435 5,822 6,308

Import 775 861 500

Total 6,210 6,683 6,808

Demand

Domestic 4,008 3,658 3,506

Export 2,200 3,025 3,302

Total 6,208 6,683 6,808

1) The 2013 Results

With the new increase of PTA, the PX demand was increased in

2013, but due to the delay in new increase for the PX plants, the PX

supply increase did not reach to the increase in the PTA demand that

the balance of D/S was tight throughout the year. Because of the


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foregoing, the spread exceeded 500U$/MT. While the market

uncertainty was expanded with the frequent breaks of ACP and

movement of joint offer down by PTA makers, 4Q Tenglong PC

(800KTA) was in operation in 4Q to have the spread declined to below

500U$ or less.


Prior to the spring season, the Chinese PTA company has

maintained high rate of operation in order to maintain the fund turnover

and market influence, but after the spring season, the PX price

plummeted in accordance with the macro factors in economic index

and frigid fund in China, the PTA operation adjustment following the

low rate of operation for polyester, and new operation of Satorp PX in

March. It is also expected to have decline in the PX price and spread

yet again due to the economic decline with new intensified increase in

PX after Q3 although Q2 is expected to support the PX price with the

increase in operation rate following the peak season for the polyester

and new capacity addition for PTA as well as operation adjustment of

the PX plants.


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ITEM : Raw Material (Naphtha)

(Unit : 1,000MT)

2012 2013 2014(P)

　　 G.R 　 G.R

　 Supply 23,222 23,431 0.9% 24,713 5.5%

Supply Import 20,195 23,210 14.9% 22,910 -1.3%

　 Total 43,417 46,641 7.4% 47,623 2.1%

　 Crackers 24,315 25,320 4.1% 25,100 0.9%

Demand* Reformers 15,674 17,071 8.9% 18,523 8.5%

　 Others 3,428 4,250 24.0% 4,000 -5.9%

1) The 2013 Results

In 2013, the domestic naphtha consumption grew at the rate

of around 6% due to the increase of naphtha cracking (4.1%) and

high operation rate of reformers (8.9%). There was less maintenance

of naphtha cracking facilities (SK, KPIC), therefore the use of naphtha

is increased. The import of naphtha volume also increased to 23,210

Kton by relatively healthy margin of reformers on 1H 2013.


With a few of routine maintenance schedule in naphtha cracking

facilities, naphtha consumption in 2014 will be decreased to 25,100

Kton compared to previous year in cracking sector.

In reforming side & refinery production, even though it is

complicated to expect market situation, it is generally understood that

naphtha will be produced more from condensate splitters and

reformer’s demand will increase as well. Samsung-Total condensate

splitter (150 Kbd) will be on stream in June and SK Condensate

splitter (100 Kbd) is expected to start 2H 2014.

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2. PolyolefinsCommittee

Polyolefins Committee

-32-


ITEM : LDPE (including L-LDPE, EVA)

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 2,068 2,178 2,648

Import 103 110 110

Total 2,171 2,288 2,758

Demand

Domestic 1,117 1,250 1,323

Export 1,054 1,038 1,435

Total 2,171 2,288 2,758


1) The 2013 Results

Total LDPE production including LLDPE has been slightly increased

by 5.3% compared with 2012 up to 2,178 thousand ton. The import

quantity of LDPE was also somewhat increased.

In the domestic market, especially the demand of EVA solar cell

and LLDPE general purpose film have been increased. For last 3

years, the average rate of domestic demand growth was 5.8%. But in

the export demand, there was no big change compared to 2012.

Hanwha chemical expanded EVA plant by 34KT and LG Chemical

expanded EVA plant by 140KT in 2013.


Production of 2014 is expected to be 2,648Kton which is

increased by 470Kton. It is mainly because of the expansion of


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Samsung Total and SK Global Chemical.

The new EVA plant of SamSung Total is planned to start to

operate from 2014. 1Q and the new LLDPE plant of SK Global

Chemical is planned to start to operate from 2014. 2Q.

Domestic demand is expected to grow to 1,323Kton which is

increased by 5.8%. Export quantity is also expected to increase by

38.2% to 1,435 KT due to the balance of production and domestic

demand.

ITEM : HDPE

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 2,152 2,208 2,275

Import 32 38 45

Total 2,184 2,246 2,320

Demand

Domestic 918 883 909

Export 1,236 1,392 1,455

Total 2,154 2,275 2,364


1) The 2013 Results

In 2013 Korea’s HDPE supply was estimated at 2,246KT up by

2.8% year-on-year, and the demand was at 2,275KT up by 5.6%

year-on-year.

With new capacity additions coming on-stream, total supply rose

by 56KT despite the decrease in production due to accidents in some


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plants.

Domestic demand dropped by 35KT due to economic downturn

whereas export rose by 156KT due to recovered demand led by

developed countries’ economic recovery and steady export kept to

China/Asia despite competition against lower-feedstock-based Middle

Eastern origin products.


In 2014 Korea’s HDPE supply is forecasted at 2,320KT up by

3.3% year-on-year, and the demand is at 2,305KT up by 1.3%

year-on-year.

With no new capacity additions, total supply is forecasted at

2,275KT up by 3.0% year-on-year due to reduced S/D and

stabilization of latest new capacity additions. Domestic demand is

forecasted at 909KT up by 2.9% year-on-year in line with GDP growth

driven by recovered investment and consumption.

Export is forecasted at 1,455KT up by 4.5% year-on-year due to

limited new capacity additions from Middle East and steady export of

Korean origin product to China.


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ITEM : P P

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 3,874 4,038 4,215

Import 23 35 38

Total 3,897 4,073 4,253

Demand

Domestic 1,521 1,555 1,614

Export 2,376 2,517 2,638

Total 3,897 4,070 4,252


1) The 2013 Results

In 2013, PP prices have generally shown stable-to-firm trend

($1,392~$1,537) in line with relatively firmer crude oil price and

feedstock prices. Overall PP industry in Korea recorded high rate of

production increase (4.2%) due to new expansion and improved

operation rate.

In 2013, Chinese PP production capacity increased by 8.1% to

15million ton and production volume increased by 10.4% to 12.4million

ton, consequently Chinese PP self-sufficiency rate increased up to

72% (2.6%p↑ year on year) due to slowdown of demand increase

and continued production increase rate. (Demand in 2013 was

17.2million ton, 4.6%p↓ year on year)


In 2014, Chinese GDP growth rate is expected to be 7.6% which

is 0.1% lower than 2013. In future, the China will develop in priority

energy reduction & environmental protection industries and organize


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infrastructure like road network expansion necessary for the growth of

inland province in terms of investment, at the same time will continue

to grow by promotion of consumption.

Chinese PP industry in 2014 is expected to expand heavy supply

due to new capacity expansion exceeding 3million ton (out of 3million

tone, about 2milliion toe will come from CTO, MTO). In case of

demand increase rate, it would stay at previous year level (about 6%)

so that it is expected to keep decreasing import volume.

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3.StyrenicsCommittee

Styrenics Committee

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Styrenics Committee

ITEM : P S

(Unit : 1,000 MT)

2012 20132014

(Prospect)

Supply

Production 660 665 670

Import 30 30 30

Total 690 695 700

Demand


Export 458 462 465

Total 690 695 700

Year-end Capacity 808 808 808

* EPS excluded

1) The 2013 Results

Affected by fluctuation of SM price and SM regional price

difference, profitability of makers is low over the previous year. In

particular, the depreciation of the Japanese yen worsens local prices

are competitive in the market, export volume to Japan reduced. On the

other hand, due to Korea-Turkey FTA, the total export volume to

Turkey has increased.


The possibility of reducing for the U.S. quantitative easing leads to

instability of financial market. And the week demand were worsened by

the low competitiveness of imported product affected by the currency

value deterioration of emarging economies in Southeast Asia. In Brazil,

Thank to holding World cup, the demand for PS is expected to

increase. PS maker in korea is expected to maintain similar level of

operating rate over previous year.


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ITEM : A B S

(Unit : 1,000 MT)

2012 20132014

(Prospect)

Supply

Production 1,446 1,640 1,694

Import 6 5 5

Total 1,452 1,645 1,699

Demand


Export 1,126 1,224 1,257

Total 1,451 1,635 1,699


1) The 2013 Results

In spite of continued global economic recession, ABS demand

was increased by 17% comparing with 2012. It is expected that some

portion of new demand came from small household goods.

But some part of demand increase is still under investigation.

Export volume was also increased by 11% in the same period due to

rising export volume to new market in Middle East, Eastern Europe and

Brazil. ABS supply was also increased as the demand increased.


Overall ABS demand is generally forecasted to be in the similar

level of 2013. However, there are some uncertainties in the market due

to global economy, energy price and political instability. Particularly,

the demand change in China will be a big challenge in 2014.

Styrenics Committee

-40-

ITEM : S M

(Unit : 1,000 MT)

2012 20132014

(Prospect)

Supply

Production 2,802 2,725 2,984

Import 804 948 880

Total 3,606 3,673 3,864

Demand

Domestic 2,376 2,406 2,430

Export 1,253 1,266 1,434

Total 3,629 3,672 3,864


1) The 2013 Results

SM production of 2013 in Korea decreased by 2.7% year on year

to 2,725KT mainly on a SM plant trouble. As a result, imports jumped

up by 18% year on year to 948KT, while exports inched up by 1%.

Domestic demand grew by 1.3%, or 30KT year on year to 2,406KT.


The year-end SM capacity of Korea will increase by 350KT on the

restart of SKGC EB-SM unit, which has stopped the production for

several years.

As a result, SM production would increase by 9.5% to 2,984KT.

However, domestic demand is forecasted to inch up by 1% as China

market’s low growth rate will limit the export from Korea. From the

increase of difference between domestic production and demand,

import will decrease, and export will increase year on year.

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4.PVCCommittee

PVC Committee

-42-

PVC Committee

ITEM : P V C

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 1,405 1,370 1,336

Import 103 77 80

Total 1,508 1,447 1,416

Demand


Export 674 726 690

Total 1,508 1,447 1,416


1) The 2013 Results

The first half of 2013, until before Chinese New Year, PVC price

was steadily raised up to a high level.However, due to high PVC

inventory in China, Carbide PVC poured out abroad and eroded PVC

price until the end of April right after the holiday.

From May to middle based on October, PVC price was generally

steady at $990/MT~$1020/MT CFR China, and there was a little

fluctuation. After that, due to poor seasonal demand ahead of winter,

the price was fluctuated once again until the end of December.

When it comes to domestic market in South Korea, despite of

economic recession, demand for window profile was increased due to

moderate growth of housing construction.


Northeast Asia demand growth for PVC has moderated less-than


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expected level of 3.0% in 2012, and 3.5% in 2013. The less bullish

outlook in the global and Chinese economies is expected to lead to

slower demand growth for PVC over the next two years until 2015.

Domestic demand in South Korea would grow 0.5%-1.5%/year

during 2014 and overall PVC market expected to be stagnated due to

depressed market situation in construction and housing fields.

ITEM : V C M

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply

Production 1,488 1,480 1,470

Import 3 14 -

Total 1,491 1,494 1,470

Demand

Domestic 1,405 1,370 1,370

Export 90 95 100

Total 1,495 1,465 1,470


1) The 2013 Results

After having some loss in VCM capacity in Asia during last two

years, tight supply situation has been maintained. Although there was a

drop in Asian VCM market price due to bearish PVC market in 2Q,

overall in 2013, Asian VCM price had shown a upward trend on the back

of tight supply and cost push from higher feedstock price, especially C2.

In Korea, domestic demand mostly accounted for self-consumption

to produce PVC. There was more import volume than usual, but it was

mainly due to temporary supply/demand imbalance during a maker’s

maintenance period. For total export volume of VCM, there was no

PVC Committee

-44-

significant difference in 2013 compared to the last year.


The Asia market balance will be more tight during 1Q of 2014

since several VCM makers are scheduled to have maintenances on

their plants at the same time in March. As PVC market is under

downward pressure, over mid $900/MT CFR level of VCM is likely to be

corrected but taking high ethylene price and fundamentally tight VCM

balance into account, the possibility of significant drop will be limited.

In Korea, there is no planned capacity of VCM-PVC addition in

2014. Unless PVC operation is adjusted significantly with continuously

weakening PVC demand, total domestic demand and export volume are

expected to be the same level with last year’s figures.

-45-

5.SyntheticRubberCommittee

Synthetic Rubber Committee

-46-


(Unit : MT)

　 2012 20132014

(Prospect)

SBR

Capa. (Year-end) 626 626 626

Supply


Import 48 67 67

Total 617 665 667

Demand


Export 342 384 454

Total 562 591 667

BR

Capa. (Year-end) 516 516 516

Supply


Import 22 17 17

Total 465 469 477

Demand


Export 300 312 340

Total 443 445 477

* SBR(E-SBR+S-SBR) / BR (HBR + LBR)

1) The 2013 Results

As of recession in the U.S. and the EU, slowdown growth of

global tire market slowdown growth was continued in 2013

Due to natural rubber oversupply in 2013, synthetic rubber market

price continued to fall

In emerging countries including Korea, the BR capacity was

expanded(BR 673KT, SBR 343KT, SSBR 620KT), so supply of the

synthetic rubber increased about 4.3%.


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Due to increase of rubber demand in china and export to US,

the export amount grew up 9% in Korea

The demand of SR was decreased due to the U.S. quantitative

easing in the last quarter.


Global rubber demand is forecasted to reach 27.7 million metric

tons in 2014, and Global synthetic rubber demand is expected to grow

by 3.8 percent in 2014.

BD supply balance will be good. The BD demand growth will be

limited, because operation rate of the synthethic rubber plant will be

decreased. The demand will be increased by 3%, but BD supply will

be increased by 7%.

Uncertainty from European credit issue & Chinese low growth may

hold demand of synthetic rubber.

In 2014, Korea will have a new additional supply (BR 30KT)

The Global market will be more competitve due to a new

additional supply in 2013~2014 (BR 975KT, SBR 423KT, SSBR 620)

With EU labeling regulation, Eco Tire market and needs for

S-SBR will be increased gradually. New supply plans are focused on

SSBR and Nd-BR except emerging countries.


-48-

-49-

6.SyntheticFiberRaw Materials

Committee

Synthetic Fiber Raw Materials Committee

-50-

SyntheticFiberRawMaterialsCommittee

ITEM :AN

(Unit:1,000MT)

2012 20132014

(Prospect)

Supply


Import 113 101 78

Total 691 831 846

Demand


Export 201 306 292

Total 699 840 848


1) The 2013 Results

Comparing with 2012, total demandof AN in Korea was increased

by 7% and reached to 534KT.

Derivative-wide, AN demand from acrylic fibre was 54KT,

recording 17% of increase from the last year which was resulting from

upswing in exports and carbon fibre expansion.

On the other hand, AN demand from ABS resin sector was

366KT, recording 5% of increase from 2012 due to export market

diversification and ABS expansion. In the mean time, AN supply also

has reached to 730KT, recording 26% of increase from 2012,

reflecting new 245KT line of Tongsuh.


Demand from AF will be expected to reach at 55KT which is

similar to last year. ABS demand will be forecasted to narrow range of


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increase, reach at 372KT.

Total domestic demand of AN will be reached to 556KT, by 4%

increase from the last year by other demand sector

Domestic production will be increased by 5% and reached at

768KT.

Import will be expected to be decreased by 23% and touched at

78KT by increased domestic production.

Accordingly, total supply would be expected to record 846KT in 2014.

ITEM :Caprolactam

(Unit:1,000MT)

2012 20132014

(Prospect)

Supply


Import 36 33 32

Total 300 281 249

Demand


Export 33 0 0

Total 300 281 249


1) The 2013 Results

Production rate of CPLM in Capro was 100% in Korea. Production

is decreased by 6.0%


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The demand of CPLM was decreased by 11.3%

ITEM :EG

(Unit:1,000MT)

2012 20132014

(Prospect)

Supply

Production 1,180 1,152 1,228

Import 454 466 442

Total 1,634 1,619 1,670

Demand

Domestic 1,180 1,166 1,142

Export 441 468 520

Total 1,621 1,634 1,662


1) The 2013 Results

Domestic polyester producers in Korea had struggled with both of

poor margin and lackluster demand in the textile industry. Market

fundamentals weakened as polyester margin collapsed, leading to a

decrease of MEG demand by 1% to 1,166KT compared with 2012.

MEG demand was subdued by decreasing operation rate in

polyester plants because of not only growing polyester filament imports

but also dropping orders from oversea garment buyers. Some of

polyester fiber makers did not run their plants any longer due to cost

burden. For instance, IKP, or Indo Korean Petrochemical found in 2009

and Star chemical found in 2011, had all stopped their operation due

to huge losses.

Accordingly, domestic buyers preferred to buy import products with


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cost competitiveness and thus MEG import had risen from 38% to 40%

compared with 2012. The volume of import products was 466KT, which

was up by 12KT(3%) compared with the previous year. Export from

Singapore and Middle-east, the main exporting countries, fell slightly,

but import from Japan increase up to 700% compared with 2012. MEG

surplus in Japan was regarded to flow in to Korean instead of China.

On MEG production front, domestic manufacture fell by 2% to

1,152KT in 2013. Lotte chemical corp. shut their three plants down (in

Yeo-su, Dae-san) due to catalyst change, which led to decrease of

MEG production. The production of HPEO was increased as the market

of EO derivatives was relatively bullish, which generated less MEG for

the market.

Despite of reduced production, diminishing demand affected

enlarging export portion. Korean MEG export in 2013 grew 9% to

468KT compared with 2012. The export to non-china made up 2% of

total export in 2012, but all MEG export coming from Korea was

heading to China in 2013, which shows that concentration on China

market was getting more intensified


In 2014, it is forecasted that the operation rate of polyester

plants in Korea will continue to be low, compared the previous year.

Although recovering export to the advanced countries will be foreseen

and the demand of polyester will grow in accordance with domestic

consumption, the import of polyester products will maintain its

increasing rate.

Thus, overall operation rate of polyester plants holding the level

of the previous year is forecasted. The import of polyester filaments in


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2013 was 187KT, increased by 27% over the previous year, and

continuously growing in import rate is estimated in 2014 as well.

Overall demand on polyester raw material in 2014 is forecasted to

be relatively lower than the previous year, taking into account

decreasing plans of the operation rates for some polyester plants in

2014 due to poor margins.

Meanwhile, production is expected to reach the level of 1,230KT,

up by almost 80KT over a year ago. No MEG plant in Korea has

announced to plan S/D in its plants except #3 plant (160K) of Lotte

chemical in yeosu in 2014. Furthermore, new plant in Ulsan will add

new MEG in domestic market presumably starting from 4Q.

Consequentially, growth in production by 7% compared to 2013 is

anticipated. The surplus resulted from decreasing in domestic demand,

along with increasing product in manufacturing is predicted to affect

growing sale in export. 520KT of export is foreseen, which is up by

almost 10% year on year.

ITEM :TPA

(Unit:1,000MT)

2012 20132014

(Prospect)

Supply

Production 6,219 5,874 5,824

Import 2 0 0

Total 6,221 5,874 5,824

Demand

Domestic 2,947 2,915 3,024

Export 3,274 2,959 2,800

Total 6,221 5,874 5,824



-55-

1) The 2013 Results

Production rate of TPA was decreased by 5.5%, Capacity addition

of China.


TPA production rate was decreased by 1.1%, due to Chinese TPA

self-efficiency rate increased up.


-56-

-57-

7.ChemicalsCommittee

Chemicals Committee

-58-

Chemicals Committee

ITEM : 2-Ethyl Hexanol

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply


Import 20 47 48

Total 415 424 418

Demand


Export 88 75 86

Total 438 423 449


※ Production is Shipment, Demand/Domestic is included self consumption

1) The 2013 Results

In the midst of the global economic recession and weak demand

in 2EH downstream, 2EH profitability has drastically worsened due to

the rapidly increased 2EH supply caused by the operation of new 2EH

plants in China.

In contrast to the firm international price of the raw material C3,

the international price of 2EH has constantly gone down to $1,415/MT

at the end of 2013 since it reached its peak at $1,715/MT on

September, 2012. Consequentially, the C3-2EH spread has steadily

narrowed and temporarily recorded negative spread, the 2EH market

has turned to a deficit.


The opeartion of series of new 2EH plants in China started in

2013 is expected to reach its peak in 2014 (total production capacity


-59-

2,100KT/year), which turn the market into chronic oversupply conditions

in Asia.

In 2014, The weak demand in 2EH downstram will be the same

as last year. Although the present strong tendency of C3 price is

moderated if China’s new C3 plants which new method(MTO, CTO,

PDH) has been applied to proceed as scheduled, the 2EH price is

expected to be staying at current price level ($1420/MT) by the

absence of self-rising factor.

We prospect that continuous deterioration in 2EH profitability is a

inevitable situation in 2014.

ITEM : Phthalic Anhydride

(Unit : 1,000MT)

2012 20132014

(Prospect)

Supply


Import 1 1 1

Total 383 383 381

Demand


Export 198 198 196

Total 383 383 381


1) The 2013 Results

The price spread between PA and OX has been gradually

narrowed over the year which cut down the profit of manufacturers.

Also, producers had difficulties to clear the inventory because of low

operating rates of PA users due to global economic downturn.

Chemicals Committee

-60-


Production rates will be lowered because of the maintenance

scheduled from makers' side and the depressed profitability in YR

2013. However, YR 2014 seems to be stablized when the market

started to be recovered from beginning of the year and the profitability

is speculated to be reinstated to YR 2012 level.


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