The petrochemical industry produces raw materials based on crude oil and processes them to manufacture chemical intermediates. Although the petrochemical industry has characteristics of capital, technology-intensive industry and business cycle-type industry, it is an intermediary product manufactured in the petrochemical industry, and it is also a life-friendly industry because it is used to produce various household goods and various products.
The petrochemical industry supplies more than 70% of raw materials for daily necessities such as clothing, mobile phones and bags. Therefore, it is an indispensable industry for real life. In addition, it contributes to the development of high-tech industries such as automotive, electronics, construction, and the nation’s flagship industries such as biotechnology, telecommunications and aerospace.
The petrochemical industry is also a capital-intensive industry that can be vertically sequenced and complexized by NCC facilities, which are naphtha crackers. Therefore, large-scale investment costs of billions of dollars are required to build a petrochemical industrial complex. However, it is a highly technology-intensive industry that can achieve economies of scale due to the initial high investment costs and can preempt specific technologies.
However, in the petrochemical industry, booms and depressions are periodically repeated depending on the economy and supply and demand conditions. Therefore, it is classified as a business cycle industry.
Key indicators to be noteworthy in the petrochemical industry are raw material prices, industrial utilization rates due to supply and demand, product prices and margins against raw materials, macro conditions such as the market conditions of downstream industries and exchange rates.
In particular, since the cost of raw materials, such as oil, accounts for 60 ~ 80% of the total cost of raw materials, the price of raw materials will greatly affect the price of products.
Representative stocks in the petrochemical industry(KOSPI/KOSDAQ)
- LG화학, 금호석유, 한화케미칼, 롯데케미칼, etc.
The steel industry is an industry that makes steel products from blast furnaces and electric furnaces. The country’s steel capacity is represented by crude steel production, and Korea is ranked among the world’s top five.
The steel industry is divided into companies that use blast furnaces and electric furnaces. Products produced in electric furnaces are used for construction and machinery, with scrap iron as raw material. The products produced in the blast furnace are made from iron ore, and are used for automobiles, shipbuilding, home appliances, and so on.
The steel industry belongs to the raw material-based industry, the energy-consuming industry, and the pollution-generating industry, and has characteristics that accompany large-scale logistics flows. However, it is a representative material industry that is indispensable for industrial development, but it is also an industry that repeats periodic stagnation and boom due to the inelasticity of steel supply capacity.
Korea’s steel industry is heavily influenced by China. China accounts for one-third of global crude steel production and consumption, and Korea’s exports to China are high.
The steel industry is based on the domestic industry rather than the export industry due to its high reliance on foreign raw materials. In other words, if the KRW appreciates, the steel industry will benefit from the won’s appreciation.
Key indicators for the steel industry are raw material prices, hostile M&As at global levels, China’s steel export policy, and exchange rates.
If raw material prices are too high, the cost burden will increase. If the raw material prices are too low, it is highly likely that steel prices will fall. The steel industry is also affected by policies such as hostile M&A and export tariffs in China.
In Korea, the Stronger KRW is basically better. The Korean steel industry is a domestic demand-oriented industry with a large amount of foreign currency borrowings related to the purchase of raw materials overseas.
Representative stocks in the steel industry(KOSPI/KOSDAQ)
- POSCO, 대한제강, 동국제강, 동부제철, 현대제철, 세아제강, etc.