Singapore — South Korea's major petrochemical makers have stepped up efforts to boost production of polypropylene as base material demand for medical device manufacturing surged following the rollout of vaccination programs across Asia, opening the door for the country to import more petrochemical feedstock naphtha.
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South Korea's demand for polypropylene and polyethylene, which are essential for making general medical devices including mask filters, plastic disposable syringes and hypodermic needles, as well as protective medical suits and gears, jumped by more than 34% in the first-quarter from a year earlier, according to downstream market analysts based in Seoul.
With many countries across East Asia kicking off their coronavirus vaccination programs in late Q1, South Korean medical device manufacturers are running their plants at full capacity for both domestic distribution and export of various plastic-based medical equipment.
Accordingly, South Korean petrochemical producers said they are well positioned to cater to the needs of medical equipment and hygiene product manufacturers, and the companies are keen to supply necessary materials.
South Korea's biggest petrochemical maker, Hanwha Total, has completed a four-year project to boost its polypropylene production capacity, a company official said.
Under the project, Hanwha Total has built a new polypropylene plant with a capacity of 400,000 mt/year, raising its polypropylene production capacity by 55.6% to 1.12 million mt/year, the biggest in South Korea, from 720,000 mt/year previously.
In addition, Lotte Chemical said a new LDS, or Low Dead Space, syringe developed by South Korea's medical device manufacturer, Poonglim Pharmatech, has been selected as one of the main injection tools to be used in the nationwide vaccination process and the petrochemical maker plans to ramp up polypropylene output as the company stands best to support manufacturing of the particular device.
As a result, South Korea's petrochemical feedstock naphtha requirement will likely trend higher over the coming months, according to Korea Petrochemical Industry Association.
South Korea imported 20.1 million barrels of naphtha in March, the highest monthly shipment since 21.3 million barrels in June 2020, the latest data from state-run Korea National Oil Corp. showed.
The country is expected to import an average of at least 19 million barrels/month of naphtha through Q2 and Q3, compared with the average 18 million barrels/month imported in 2020 and the 18.84 million barrels/month average in 2019, according to South Korean petrochemical feedstock traders surveyed by Platts.
In recent spot trades, Lotte Chemical was heard to have purchased via tender open-specification naphtha with minimum 75% paraffin content for second-half June delivery to Yeosu, at a premium of more than $12/mt over MOPJ naphtha assessments on a CFR basis, higher than the premium of around $8/mt paid for May 21-June 5 delivery cargo purchased in the previous trading cycle.
The price spread between polypropylene raffia grade CFR FE Asia and C+F Japan naphtha jumped to a four and a half-month high of $702.625/mt on April 13, but retreated to $531/mt on May 6 due to weak demand in China.
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As vaccination programs pick up pace in Q2, Lotte Chemical said it plans to expand and upgrade the quality of polypropylene and other products to help medical device manufacturers meet the highest standards, the company said in a statement.
The company's Daesan steam cracker can produce 1.1 million mt/year of ethylene and 550,000 mt/year of propylene, while its cracker in Yeosu is able to produce 1.18 million mt/year of ethylene and 550,000 mt/year of propylene.
LG Chem plans to start a new naphtha-fed steam cracker in Yeosu on June 14, which is likely to boost South Korea's naphtha imports further. The cracker, with an ethylene production capacity of 800,000 mt/year and propylene capacity of 400,000 mt/year, will supply ethylene feedstock to three new polyethylene plants coming up at the same site.
Meanwhile, Hanwha Total has also upgraded an NCC gas side cracker to boost its ethylene production capacity by 150,000 mt/year to 1.53 million mt/year, according to the company official.
Polypropylene and polyethylene will be crucial to South Korea's medical device manufacturing and it is also an important material used in the manufacture of high-value-added, durable goods for specialty applications such as underfloor heating pipes and automotive parts, the company official said.
South Korea's public vaccination program was launched on Feb. 26. The health ministry has administered a total 3,560,324 vaccine shots so far -- 1,922,520 with AstraZeneca and 1,637,804 with Pfizer, accounting for around 6.8% of the country's total population of 52 million, according to the Korean Disease Control and Prevention Agency on May 6.