(From the Special Report Rubber's Global Footprint: Focus on South Korea from the May 30, 2011, issue of Rubber & Plastics News)
SEOUL, South Korea—The world's rubber industry may be fixated—with good reason—on China's growth as a competitor and market for all things rubber, but that huge nation isn't the only important player in Northeast Asia.
Japan, of course, is another. And then there is South Korea, second only to China in GDP growth—6.1 percent in 2010, compared to 10.5 percent for China, and 2.8 and 2.6 percent for Japan and the U.S., respectively. In rubber consumption, while South Korea's numbers are miniscule next to world-leading China's, the expected 6.8-percent growth in domestic demand this year to 688,000 metric tons compares favorably with the developing nations of Asia.
South Korea, though, has advanced far from the “developing nation” stage. Today it's a mature economy, but unlike many developed nations, still is growing rapidly.
In the past four decades, South Korea has transformed itself from being one of the poorest nations into an economic power, the world's 14th-largest economy. It is very foreign-trade oriented—the sixth-largest exporter and 10th-largest importer.
Look no further than your local tire retailer to verify that fact. Fully 15 percent of all imported passenger tires sold in the U.S. come from South Korea, according to figures presented by Keiichiro Okuda, executive director of the Japan Automobile Tyre Manufacturers Association, at the recent International Institute of Synthetic Producers Annual General Meeting in Seoul, South Korea.
South Korea accounts for 14 percent of all car tires sent to Europe, 8 percent of those destined for Brazil, and 18 percent to both Russia and India, the JATMA official said.
It's a two-way street. Japan exports 1.29 million tires of all kinds to South Korea, according to figures Okuda cited from the Japan Ministry of Finance.
The economic miracle that is South Korea—according to Choong Yong Ahn of the Korea Trade-Investment Promotion Agency—is well documented by the fact South Korea is now a donor nation in the global Organization for Economic Co-operation and Development.
“This is the first economy in the world that transformed itself from an aid recipient into an aid-providing economy,” said Ahn, who is the foreign investment ombudsman and chairman of the nation's Pres- idential Regulatory Reform Commit- tee.
Ahn pitched South Korea as an investment destination to the participants at the IISRP meeting. He had plenty of facts and figures to back up his declarations. Such as:
— South Korea is strategically located, between China and Japan;
— “We enjoy a very powerful human resource,” with a population of 49 million and a national characteristic of putting a premium on education;
— South Korea is No. 1 in the world in broadband access, shipbuilding and steel plate production; and
— It's the world's fifth-largest automotive producer and third in production of petrochemicals.
South Korea also boasts an excellent internal transportation system, with highways and high-speed rail, and operates the world's 17th-largest port, Ahn said.
The country has displayed a stable and predictable political climate, which is business-friendly, and has relatively low taxes, according to the Economist Intelligence Unit.
“The market opportunities provided by its large and increasingly wealthy population also bolster South Korea's overall ranking,” the EIU said.
There's another side to that coin, the analyst group said.
The potential of armed conflict with North Korea remains constant. And while Ahn and others tout the opportunities for foreigners to do business in the country, the EIU said there remains a perception that the government pursues policies that favor domestic firms.
The analyst group also warns that the South Korean government needs to raise its labor participation rate, which is low by developed nation standards and caused, in part, by the lack of women in the workplace.
The country also has to defend its position as a global leader in information and communications technology to maintain its productivity growth.
Many of South Korea's companies, while strong at home, look outward for growth. And that extends beyond Hy-undai, LG, Kia, Samsung and other well-known names to include rubber industry firms.
There are three major tire makers based in South Korea: Hankook Tire Co. Ltd., Kumho Tire Co. Ltd. and Nexen Tire Corp.
Hankook, the world's eighth-largest tire maker, posted sales of $3.76 billion last year, and operates five plants in South Korea, China and Hungary. One day, its top officials have said, it expects to have a tire factory in North America.
Rival Kumho Tire Co. Ltd. is a $2.3 billion company with nine factories in South Korea, China and Vietnam. The 13th-ranked tire maker has plans to build a tire plant in Macon, Ga., although it has delayed the project.
Nexen Tire Corp. is the third-largest of the South Korean tire makers, with two plants, one domestic and the other in China. It ranks 23rd in global tire sales, at $901 million.
Among other participants in the South Korean elastomer industry are Korea Kumho Petrochenmical Co. Ltd., a major producer of synthetic rubber; Kumho Polychem Ltd., which makes EP/EPDM rubber; and LG Chem Ltd., which produces nitrile and polybutadiene rubbers, and thermoplastic elastomers.
A strong characteristic of South Korea's elastomer-related companies is a global strategy. Songwon Chemical Co. Ltd., for example, shows how it's done.
“Our strategy is to grow in the emerging markets, such as China, India, Latin America and the Middle East,” said Jim McGinley, executive vice president, business management, for the chemical company, which supplies phenolic and phosphate antioxidants throughout the world, and serves the polyurethane and TPE markets, and to some extent, rubber processors.
“We have announced entities and joint ventures in China and India, and are working on expanding our presence in the Middle East with a facility to produce antioxidant blends or 'One Packs' tailored for the polyolefin producers,” he said.