Petrochemical industry is an important industry for South Korea as it is ranked fifth and fourth in production (6.1%) and exportation (8.3%) respectively. South Korea is currently ranked fourth in the world based on its production capacity of ethylene (9.26 million tons) and it exports 55% of production. However, South Korea leans heavily on advanced countries such as Japan when it comes to fine chemistry. Fine chemical products with high purity are needed to increase competitiveness of industries of electronic, car, semiconductor, and display that are currently major industries of South Korea. Multifunctional light chemical materials are needed to develop major applications such as self-driving car, drone, robot, 3D printer of the Fourth Industrial Revolution. This is the reason why many have been pointing out the need for advanced strategies centered on high-valued fine chemistry to develop South Korea’s chemical industry one step further.
According to information from Korea-Japan Cooperation Foundation for Industry and Technology, raw materials for fine chemistry (15%), plastic products such as film and sheet, products for chemical industry (31%), xylene (95%) are listed in the top ten ranking based on level of dependence on Japanese businesses. This is the reason why some suggest that state-of-the-art chemical materials can be the next target for Japanese Government’s new regulation as South Korean businesses highly depend on Japanese businesses for such materials.
◊South Korea does not expect huge effect from Japanese Government’s regulation on its petrochemical industry
As Japanese Government’s regulation seems to expand towards other areas besides semiconductor and display, South Korea’s chemical industry is working on making necessary preparations. Individual chemical business is finding out how much of their materials are imported from Japanese businesses. Ministry of Trade, Industry and Energy (MOTIE) and working with other agencies such as Korea Petrochemical Industry Association (KPIA) to select items that are heavily depended on Japanese businesses and they are considering possible countermeasures.
South Korean businesses are heavily dependent on Japanese businesses for xylene, which is one of raw materials for petrochemistry, as they import 95% of xylene from Japanese businesses. Amount of importation of xylene from Japanese businesses is about $1.085 billion. Xylene is an aromatic hydrocarbon and is a raw material for para-xylene that is one of petrochemical products.
However, South Korea’s petrochemical industry believes that Japanese Government’s regulation will have limited impact on its industry. This is because South Korea is also competitive as a major petrochemical exporting country and it can diversify supply and demand as it also has other ways of importing petrochemical products besides Japan.
“Although we use some Japanese materials during our process, we are using Japanese products because Japan is closer to us not because physical properties impact quality of their products.” said a representative for South Korea’s petrochemical industry. “Although Japanese products such as high-valued special products are high-quality products, we can find replacements from Germany and others.”
Due to petrochemical industry’s characteristics, it is more advantageous to use foreign products due to reasons such as economic feasibility and environmental aspect rather than internalizing raw materials.
“Unlike semiconductor industry, we do not have to localize materials that are used in our industry because we import materials due to economic and environmental reasons not because we will not be able to manufacture our products.” said a different representative for the industry. “Just like how we do not have to purchase every product that is needed in our daily life, it is inevitable for us to purchase certain raw materials from foreign businesses due to aspects of cost and time.”

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◊South Korea’s fine chemical industry lacking competitive edge
However, story changes when it comes to fine chemistry. Although South Korea is very competitive when it comes to general petrochemical industry, it is highly dependent on foreign businesses when it comes to fine chemistry as it has less competitive edge than other advanced countries. Raw materials for fine chemical industry were the third highest imported items from Japan in 2018.
Fine chemistry is processing-type chemical industry that produces finished products by mixing and processing intermediates that are extracted and technical ingredients through many stages of processes. It is a technology-intensive industry and it has high value based on a small quantity batch production. Medicine, pesticide, dye and paint, flavoring, cosmetic, catalyst, adhesive, surfactant, and additive are part of fine chemistry. Most of materials for electronic industries related to semiconductor and display can be categorized as products from fine chemistry. Some predict that there is a high chance that Japanese Government will start regulating products from fine chemical industry.
Electric vehicle battery material industry that is being promoted by South Korean Government as the ‘second semiconductor industry’ is prime example. Out of four major components (cathode material, anode material, separator film, electrolyte) of a lithium-ion battery, South Korean businesses are heavily dependent on Japanese businesses for separator film, artificial graphite anode material, and electrolyte additive. Asahi Kasei and Toray are currently ranked first and third respectively within separator film market and they are major suppliers for LG Chem and Samsung SDI. Many South Korean businesses use Japanese electrolytes due to their performance. Although South Korean businesses import natural graphite anode materials from Chinese businesses, they import most of artificial graphite anode materials from Japan.
“Because South Korean businesses and global battery manufacturers purchase battery materials from Japanese businesses, they are paying careful attention to Japanese Government’s regulation.” said a representative for the industry. “Although battery manufacturers will start to diversify suppliers in a long term, they will be affected by the regulation in a short term.”
South Korea is also highly dependent on Japan for precious metal catalyst that is used in various areas. Although there has been major progress of localizing precious metal catalyst, Heesung Catalysts is only one of the few major companies that manufacture precious metal catalysts. Although South Korean businesses can find replacements from the U.S. and Europe, they can suffer temporary setbacks to their supplies due to payment deadline and supply.
“South Korea’s chemical industry’s task is to secure differentiated capabilities and to enhance its portfolio.” said a representative for the industry. “However, it needs to take careful approach rather than making emotional actions.”
Staff Reporter Jung, Hyeonjung | iam@etnews.com & Staff Reporter Ryu, Taewoong | bigheroryu@etnews.com