Korean petrochemical firms are cautiously optimistic about a potential earnings recovery following China's recently announced stimulus plan, according to The Korean Times. The plan aims to boost domestic demand through a 300 billion yuan ($41 billion) initiative designed to encourage consumers to replace old products with new ones. This move was announced during China’s National People's Congress, held from March 5 to 11, and is part of Beijing’s efforts to sustain its economic growth target of 5 percent.

China’s focus on revitalizing spending in key sectors — including housing, cars, and consumer electronics — has raised hopes for increased demand for petrochemical products. Given that these industries heavily rely on petrochemical materials, Korean chemical companies that supply materials for IT device exteriors and other applications could see substantial benefits.

The Korean Times reported that Korean petrochemical firms have faced declining profits in recent years, largely due to a global oversupply of Chinese petrochemical products. This oversupply is projected to grow significantly, from 44 million tons in 2023 to 61 million tons by 2028. However, if China’s stimulus successfully stimulates domestic demand, this could ease the oversupply pressure and provide new opportunities for Korean firms to expand their customer base.

In addition to China's economic measures, a potential ceasefire between Russia and Ukraine is seen as another positive factor for the industry. A ceasefire could lead to increased petroleum production in Russia, which in turn would lower naphtha costs. Naphtha is a critical raw material in the production of petrochemical products, and reduced costs would improve the price competitiveness of Korean petrochemical firms in global markets.

Hana Securities analyst Yoon Jae-sung told The Korean Times that Korean firms have struggled to keep pace with their Chinese and Taiwanese counterparts in terms of cost competitiveness over the past three years. He attributed this to China’s ability to purchase Russian naphtha at roughly 5 percent lower prices. If Russia stops supplying discounted naphtha to China after potential U.S. sanctions are lifted, Chinese firms may lose this competitive edge, further benefiting Korean producers.

Moreover, The Korean Times noted that if oil prices decline further, Middle Eastern countries may reconsider their plans to expand petrochemical facilities. Such a move could limit additional supply in the global market, improving the balance between demand and production.

With China’s stimulus plan poised to boost demand and geopolitical shifts potentially lowering raw material costs, Korean petrochemical companies are hopeful for improved financial performance and greater market stability in the near future.