Enlightenment of Japanese and Korean petrochemical companies on China’s coal-to-olefins

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In order to cope with the challenges from Middle Eastern producers with raw material cost advantages, Japanese and Korean petrochemical companies are committed to readjusting product solutions and market positioning, striving to open up new areas, or expand business scale and enhance competitiveness. Japanese chemical companies strive to reduce the production of general petrochemicals and shift the focus of development to functional chemicals, electronic materials and other high value-added products. Mitsubishi Chemical Company is a representative of the implementation of this strategy. The company plans to withdraw from the polyvinyl chloride and styrene markets in 2011 and focus on developing bisphenol A, polycarbonate, purified terephthalic acid and high value-added polypropylene businesses. The company's recent merger with Mitsubishi Rayon also strengthens its competitiveness in the methyl methacrylate, polymethyl methacrylate and carbon fiber markets. Although Japanese companies have made significant progress in product diversification, they have struggled to integrate operations, especially reducing ethylene cracking capacity. Like Japanese companies, Korean chemical companies also focus on diversifying petrochemical products to reduce risks. Korean companies produce high value-added polyolefins. For example, LG Chem started producing metallocene linear low-density polyethylene (mLLDPE) last year and is developing metallocene polypropylene (mPP), which is expected to be industrialized within a few years. The company will also develop high-value-added polymer products such as extrusion-coated grades of low-density polyethylene, ethylene-vinyl acetate copolymer and cross-linked polyethylene. In addition, Samsung Total said it will develop and produce high-value polyolefin products to meet the needs of the automotive and electronics industries. At the same time, Korean chemical companies are continuing to expand their petrochemical business. In the past 3 to 4 years, most of South Korea's major petrochemical producers have expanded their production capacity to world-class scale, and several companies are planning to further expand their production capacity in the next few years. As China's low-end polyolefin production capacity gradually becomes excessive, the development of high value-added polyethylene and polypropylene products will enhance the competitiveness of China's coal-to-olefins industry.