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Pandemic presents best winter season ever for petrochemical industry
By Kim Byung-wookPublished : Jan. 8, 2021 - 14:45
Major South Korean petrochemical companies such as Hyosung Chemical and Lotte Chemical are enjoying an unexpected sales boost, as the pandemic has driven up demand for polypropylene, a raw material for mask filters and syringes.
“Winter season is typically an off-season for the petrochemical industry. However, thanks to the pandemic, favorable market conditions continue for the petrochemical industry, even better than its usual peak season,” said SK Securities analyst Sohn Ji-woo.
The price of polypropylene surged to a two-year high last month due to global shutdowns of petrochemical plants and a shortage of shipping containers. The average price of polypropylene products, which stood at $790 in the second quarter last year, jumped more than 30 percent to $1,040 in the fourth quarter, according to industry data. After reaching its peak of $1,115 in early December, the figure is currently around $1,100.
The upward spiral is expected to continue this year as countries prepare massive vaccination campaigns.
Korea has so far secured COVID-19 vaccines for 44 million people. At least 88 million syringes would be needed, as people have to be inoculated twice.
The immediate demand for syringes is set to benefit Hyosung Chemical, Lotte Chemical and GS Caltex, which respectively command 65 percent, 18 percent and 14 percent of the domestic polypropylene market for syringes, according to Kiwoom Securities. The market is estimated at 11,000 metric tons.
As syringes have to be made with medical-grade polypropylene certified by the US Food and Drug Administration, the three players are certain to benefit from the vaccination campaign.
One ton of medical polypropylene can make 100,000 syringes, according to industry sources. Medical polypropylene costs about $200 per ton more than ordinary polypropylene.
SK Innovation, S-Oil and Hanwha Total, which produce general polypropylene products, not medical ones, are also expected to get an extra boost from the global supply crunch.
“Korean petrochemical companies have enough production capacity to provide sufficient medical polypropylene products. It’s entirely up to syringe companies to churn out enough syringes with them,” said a Hanwha Total official.
Hyosung Chemical and GS Caltex can manufacture medical polypropylene products with existing facilities. Hyosung Chemical’s total polypropylene production capacity is 640,000 tons and GS Caltex’s is 180,000 tons.
By Kim Byung-wook (kbw@heraldcorp.com)
“Winter season is typically an off-season for the petrochemical industry. However, thanks to the pandemic, favorable market conditions continue for the petrochemical industry, even better than its usual peak season,” said SK Securities analyst Sohn Ji-woo.
The price of polypropylene surged to a two-year high last month due to global shutdowns of petrochemical plants and a shortage of shipping containers. The average price of polypropylene products, which stood at $790 in the second quarter last year, jumped more than 30 percent to $1,040 in the fourth quarter, according to industry data. After reaching its peak of $1,115 in early December, the figure is currently around $1,100.
The upward spiral is expected to continue this year as countries prepare massive vaccination campaigns.
Korea has so far secured COVID-19 vaccines for 44 million people. At least 88 million syringes would be needed, as people have to be inoculated twice.
The immediate demand for syringes is set to benefit Hyosung Chemical, Lotte Chemical and GS Caltex, which respectively command 65 percent, 18 percent and 14 percent of the domestic polypropylene market for syringes, according to Kiwoom Securities. The market is estimated at 11,000 metric tons.
As syringes have to be made with medical-grade polypropylene certified by the US Food and Drug Administration, the three players are certain to benefit from the vaccination campaign.
One ton of medical polypropylene can make 100,000 syringes, according to industry sources. Medical polypropylene costs about $200 per ton more than ordinary polypropylene.
SK Innovation, S-Oil and Hanwha Total, which produce general polypropylene products, not medical ones, are also expected to get an extra boost from the global supply crunch.
“Korean petrochemical companies have enough production capacity to provide sufficient medical polypropylene products. It’s entirely up to syringe companies to churn out enough syringes with them,” said a Hanwha Total official.
Hyosung Chemical and GS Caltex can manufacture medical polypropylene products with existing facilities. Hyosung Chemical’s total polypropylene production capacity is 640,000 tons and GS Caltex’s is 180,000 tons.
By Kim Byung-wook (kbw@heraldcorp.com)
