The Competitiveness of Korea’s Fine Chemicals Industry

Sangwon Lee ()
Additional contact information
Sangwon Lee: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr/en

No 25-2, Industrial Economic Review from Korea Institute for Industrial Economics and Trade

Abstract: The COVID-19 pandemic, the simmering trade conflict between the US and China, and the ongoing war between Russia and Ukraine have caused significant disruptions in the supply of critical raw materials (CRM), which are key inputs in the fine chemicals industry, and for which there are few viable substitutes. This reliance exposes the industry to potentially catastrophic geopolitical and environmental risks. The increasingly fragmented global supply chain in major economies exacerbates the risk of shortages and price volatility, and this is particularly true for CRM imported from China and a handful of other countries. Restrictions on CRM trade can lead to shortages and price increases, directly affecting production costs. And due to China’s dominance in the CRM supply chains, alternative sources are often more expensive, further diminishing profitability in this industry. Moreover, supply disruptions and delays complicate inventory management and demand forecasting, exposing companies to overstocking and stockout risks; prolonged inventory storage also accelerates depreciation. And while diversifying sources of CRM can stabilize supply, it also makes quality control and compliance more difficult and costlier. This poses a special challenge to the fine chemicals industry, where uniform quality standards are of utmost importance, given that most fine chemicals are high-performance products subject to stringent environmental oversight. In this paper, I assess the current state of competitiveness of South Korea’s fine chemicals industry in light of the risks described above, using a SWOT analysis based on the results of a survey of industry experts. I also identify some key implications for policy based on the results of the analysis.

Keywords: chemicals; fine chemicals; chemical industry; critical raw materials; CRM; supply chains; China; rare earths; digital transformation; DX; small and medium-sized enterprises; SMEs; small businesses; digital technologies; climate change; population aging; population decline; demographic change; South Korea; Korea Institute for Industrial Economics and Trade; KIET (search for similar items in EconPapers)
JEL-codes: F13 L65 Q37 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2025-02-28
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.kiet.re.kr/en/pub/ecoreviewDetailView? ... ar=2025&month=&sval= Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:kieter:2025_002

Access Statistics for this paper

More papers in Industrial Economic Review from Korea Institute for Industrial Economics and Trade Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea. Contact information at EDIRC.
Bibliographic data for series maintained by Aaron Crossen ().