The South Korean government spearheading restructuring overcapacity industries has warned petrochemical and steelmaking sectors would be next to come under scrutiny after shipbuilding and shipping areas and advised voluntary streamlining.

The government specifically named terephthalic acid (TPA), a material of polyester fiber and plastic bottle, polystyrene (PS), a material used for cases of household appliances, as well as steel plate and steel pipes as areas in need of scale-down.

“The petrochemical industry has fared relatively well all thanks to cheap oil prices. It should make most of the boon to restructure preemptively to stay ahead in the competition after business conditions deteriorate with rebound in oil prices,” Joo Hyung-hwan, minister of Trade, Industry and Energy, said on Wednesday at a meeting held to discuss measures to strengthen competitiveness of the steel and petrochemical industries.

According to a consultation report of global consulting firm Bain & Company, four products among the 33 major petrochemical products have been facing an oversupply. The products include TPA, PS, polybutadiene rubber and styrene butadiene rubber (BR, SBR) and polyvinyl chloride (PVC). The exports of the four products amounted to 3.42 billion won ($3.12 million) last year, and the petrochemical industry accounts for 7 percent of the country’s gross national product (GNP), the fourth largest exports of the country.

The government drew up the conclusion based on consultation reports from Bain & Company for the petrochemical industry and Boston Consulting Group for the steel industry. It will come up with specific plans to enhance competitiveness of the petrochemical industry on Friday.

But some industry observers doubt whether the government would be able to come up with any strong measures required to reform the country’s petrochemical and steel industries as the reports that the government consulted were initially requested by the related industry associations that are formed with members of related companies.

By Ko Jae-man and Park Yong-beom

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