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At present, we are nearing the conclusion of amalgam based electrolysis technology in the manufacture of chlorine. The primary reason for the ending of this practice is the need to reduce the use of mercury because of its high impact on people and the environment. Although the amount of mercury in the production exhaust is relatively small, the affects of this metal are cumulative in nature, and have proven negative health effects.

Fortunately, following technological advances, an advanced membrane process has been developed that offers a comparable product, but without the added burden of having to manage mercury filled waste flows.

With a replacement process now available, the European Commission, through the European Chemicals Agency (ECHA) has ordered a ban on the use of mercury in industrial production and consumer use. So there will soon be no more mercury thermometers on sale.

That said the old system of mercury or amalgam based electrolysis is still currently widely in use due to the quality of material that it produces for a reasonable manufacturing cost. But with a ban imminent, manufacturers all over Europe are readying themselves for the conversion to membrane technology.

The following table (with data taken from publicly accessible sources) shows individual producers within the EU and their capacity to produce chlorine. It shows the processes used, and therefore it is possible to see which manufacturers need to either convert to membrane technology or terminate production in the near future.

From the above data it can be seen that only a few producers remain that are producing chlorine with a KOH by-product. As conversion projects increase, there will be a decrease in production capacity for KOH.

Already, the conversion is currently underway in Spolchemie (Czech Republic) which will increase capacity before the end of 2016, whilst the firm Chimiques Produits de Loos (FR, Tessenderlo Group) is also preparing for a conversion, which will be completed in the year 2017.

Naturally, the reduction in KOH production will affect many industries that need this useful resource. The table below shows which areas will be hardest hit.

This chart suggests that the main consumer of KOH is for technical products (mostly the production of potassium salts). About 30% of sector is for the manufacture of potassium carbonate, about 20% for potassium phosphates and the remaining 50% consists of other potassium salts such as potassium permanganate, potassium dichromate, potassium chromate, potassium cyanide, potassium nitrate and the like.

The second largest segment consists of fertilizer production where potassium is one of three major nutritional elements used for soil improvement.

The other processing segments also use KOH as source of nutrient, or alternatively for the regulation of the acidity where it acts as a strong base.

At present, there is a discussion about how the imbalance in the KOH market will look during the period from 2015 to 2020. Potassium hydroxide is an important product and a shortfall in production would be a big problem.

With such a challenge on the horizon it is as yet unclear what course the industry will take in response. How do you think the industry will respond to this imbalance?

Today, Korean chemical industry chiefs are starting to focus on technology and research to spearhead its future success in the chemicals industry. Knowing that chemical products that have low or zero impact on the environment will be in increasing demand, the trend has been to create environmentally friendly chemical products.

As Jack Park of the publication ‘Korea Business’ notes, “Korean chemical companies are focusing on eco-friendly products in order to leave Chinese rivals behind. They are striving to seek new growth opportunities with high value-added functional products, while Chinese chemical companies are about to catch up with them in the common product market.” He continues to observe that, “SK Chemicals, for example, is concentrating on the bisphenol A-free bioplastic of Ecozen. The product is scheduled to be supplied for use in USIM cards and toothbrushes. The annual demand for such plastic materials is expected to reach 90 million tons soon in the global credit card market.”

Advances like these are being supported by the government, who are setting clear goals and funding initiatives to give Korea an information advantage. As boasted in a recent report by Invest Korea, “The Korean government is highly ambitious to enhance green chemistry and clean energy by setting the goal to develop 100 core technologies for new materials and components in areas like solar power, renewable energy and light-emitting diodes, according to the investment plan called ‘Material and Components Technology 2012’.”

But this does not mean that Korea has entirely solved the problems of its chemicals industry future, as it will still require outside traders, as a recent report by the Dutch government ‘Enterprise Agency‘ claims, “ The goal of the [Korean] strategy is to become the fifth biochemistry country in the world by 2020. It aims at reaching 10% market share of domestic chemicals, 5% market share of world biochemicals and €917 million of domestic biochemicals production.“ Interestingly, the report continues to state that, “Finding biomass is the biggest challenge that Korea faces in the development of a biochemistry industry. Not only biomass but also basic materials such as Poly Lactic Acid (PLA) are heavily dependent on import. In terms of technology, Korea is advanced in fermentation technology. “

The Dutch are interested in the state of the Korean chemicals industry, as foreign investment continues to be a key component to Korea’s chemicals industry success. For example, Dupont has five major facilities spread over the country. In Ulsan it manufactures engineering polymers such as Butacite® an interlayer film for laminating glass, as well as Corian® solid surfaces. In Gumi, it has a joint venture with Samsung where copper-laminate type products are manufactured for mobile phones. Chemical products are also widely made for the automotive industry, smartphones, TV’s and semiconductors, as well as  designing displays for optical bonding, light-emitting diodes, mobiles and synthetic mineral fibres as well as photovoltaic for the energy sector.

Dupont is not alone, with other major corporations like BASF beginning to focus more attention on Korea, recently moving its Asia-Pacific headquarters for its electronics business from Hong Kong to Seoul.

As Invest Korea notes, “These foreign companies have enriched the Korean chemical industry by approximately US$7.5 billion in FDI between 2003 and 2013, making it the Korean economy’s second highest recipient of foreign investment.  And since the future of Korean´s chemical industry depends highly on new, environment-friendly composite materials of higher functionality, extensive and efficient R&D investments are essential for Korea to continue down its path towards becoming a regional specialty chemical hub.”

But despite government support and large foreign investment, Korea still faces many challenges. Alongside its support for the chemicals industry’s green research, it has also imposed a carbon emissions trading scheme that many fear will hamper growth.

As Ned Stafford of Chemworld writes, “The goal of the scheme is to cut carbon emissions by 30% of projected levels for 2020 [which] would equate to a 4% reduction on 2004 levels. Under the plan, companies whose total emissions exceed 125,000 tonnes per year or who operate at least one site with emissions exceeding 25,000 tonnes per year must participate in the system. The trading system has been divided into three phases, with the first running until the end of 2017. [For now] some 1.687 billion carbon allowance permits, each equivalent to one tonne of carbon dioxide, will be available at no cost to participating companies during phase one.“

However, and perhaps most worryingly, is the government‘s predicted cost of one tonne of carbon once the system is fully developed and running. As Stafford notes, “The South Korean government has said it expects carbon allowances to trade at around US$20 level, which would be well above levels on carbon markets in the US, EU, China and New Zealand.“

The chemicals industry is also subject to the upheavals of increasing bureaucracy. Since 1991, all chemicals have been categorised and regulated by the Toxic Chemicals Control Act (TCCA). As public and government concern over chemical processes and hazardous products has risen, newer legislation introduced in January 2015, split the regulations into a new version of TCCA (called the Chemical Control Act or CCA) and K-REACH.

The Chemical Inspection and Regulation Service defines that difference as, “K-REACH focuses on registration and evaluation of substance while CCA focuses on the control of hazardous substance and response to chemical accidents.”

This difference is outlined further by Jane Vergnes Ph.d, the Senior Toxicologist of the ACTA Group (an international consultancy firm with Asian chemicals regulations expertise). She states that, “TCCA has broad reach in terms of the array of chemicals it currently covers and the activities it affects. South Korea maintains an extensive chemical inventory and, as under other regulatory schemes, ‘new’ chemicals — those not listed on the inventory — are subject to notification requirements unless otherwise exempt. The law provides differing notification options.” She continues by stating that, “K-REACH requires that anyone who manufactures, imports, or sells new and existing chemicals in Korea, at greater than or equal to 1 ton per annum, must annually report volume and use details unless otherwise exempt.“

Like REACH in Europe, it has yet to be concluded if the advantages of this bureaucracy will outweigh the burden. For now they can represent a major hurdle for any chemicals importer, such that a contact inside Korea is recommended before trades are concluded.

Despite these weaknesses, it seems likely that Korea will continue to have economic success, even in the shadow of its big neighbour China. Indeed, maybe aided by China, as economic and political ties are strengthening.

Although in the North, South Korea is disadvantaged by having an almost non-economic neighbour in North Korea, for which it must maintain a significant defence force against possible attack, the country is generally geographically well placed for 21^st century trade.

It has been able to work well alongside western businesses that have wanted to base themselves in Korea, whilst at the same time developing its own strong brands, multinational corporations and cultural identity.

Similarly, it has also been able to maintain a high level of research, and has one of the best educated workforces in the world. This gives it a clear advantage in the chemicals world, especially within the expanding speciality chemicals sector, and the predicted increase in tailor-made chemical solutions to specific problems.

This is possibly the best growth area in the Korean chemical industry; speciality chemicals for specific purposes, ‘green’ chemicals and those for use in biofuels offering the greatest potential. Although whatever you decide to trade in, there are options available, as overall the future looks bright for the Korean chemicals industry and, with the right product, entrepreneurs wishing to trade there can make good business.

With the rapid growth of China, and its increasing dominance of the chemicals industry in the region, it has been all too easy to ignore South Korea’s significance as an economic power house. But it would be foolish not to notice how Korea has developed, as it may well shed light not only on the opportunities available in the Land of the Morning Calm, but also explain how other Eastern economies like China and Vietnam will develop once they have matured.

Certainly Korea is a global big league hitter, with a manufacturing industry equal to US$1.4 trillion, of which, according to a report by the government funded Invest Korea, “the chemical industry accounts for US$152 billion (11.4%).”

Similar to other East Asian countries, Korea has grown quickly out of the rubble of war. This was a war that was not localised, but whose front ran at various times from the very South of the peninsular to the Chinese border in the North. The devastation was immense, as Young-Iob Chung, Professor (Emeritus) of Economics at Eastern Michigan University notes in his study ‘South Korea in the Fast Lane’. He writes, “By 1951, 41% of factories and 44% of production facilities had been destroyed (including 80% of power stations).”

However, once an armistice had been established in 1953, industry started to develop. Large foreign investment during the 1970’s, several sensible governments and a stable democratic society in the South, soon brought success to the Korean chemicals industry. In fact, it increasingly became a key part of the economy as a whole, as Chung further notes, “Chemicals had one of the fastest growth rates [of any industry in Korea]. The annual increase in production was, on average, 23%, resulting in an expansion of its share of GDP from 1.2% in 1962 to 10% in 1986.”

This success was brought on by an expansive construction program developed around meeting demand in synthetic fibres. As noted by James Couper and Roy Penney (both professors of Chemical Engineering at the University of Arkansas) in their study, ‘The Chemical Process Industries Infrastructure’. They note how, “The [Korean] chemical industry began with foreign capital and technology in the 1970’s when full-scale modernisation of South Korea began. From the late 1980’s, the petro-chemical industry grew rapidly as a result of large-scale construction and expansion activities. [Expansion was needed] because of chronic shortages of synthetic resins, synthetic rubber and synthetic fibre raw materials, as well as the rapid building of petro-chemical facilities.”

Furthermore, the Korean economy as a whole blossomed in the mid-eighties, largely based on four events.

• In September 1986, the Plaza Accord was signed, whereby the five major global economies decided to drive down the value of the US dollar. As the Korean currency, the Won, was pegged to the dollar, it also depreciated, making Korean products extremely well priced on global markets.
• The Japanese Yen was strong, making Korea a viable high-tech competitor.
• The publicity of the 1988 Seoul Olympics drew much attention to the country, projecting it as an advanced economy that could compete with Japan in the region.
• There was strong demand for semi-conductors, which was a major Korean export at the time.

Today, many of the factors that drove the Korean economy to success are still present, but now that the Korean cost of living has risen to be one of the highest in the world, the country has had to refocus. The effects of a strong Yen and a successful Olympic Games do not last forever.