Boston, MA -- (ReleaseWire) -- 02/10/2014 -- BMI's latest Taiwan Petrochemicals Report foresees a worrying trend for Taiwanese petrochemicals producers to move investment in basic chemicals to mainland China and South East Asia. Unless Taiwan can diversify and specialise to add value to the olefins production it currently possesses, the industry is likely to fall behind and lose its competitive edge.
The domestic petrochemicals market was depressed in 2013 and was set for another year of poor market dynamics, with broader economic trends remaining unsupportive. In the first 11 months of 2013, the chemicals products index grew 2.4% y-o-y, but rubber declined 2.5% and plastic fell 1.1%. The trend reflected the poor state of manufacturing, particularly in motor vehicles and parts (down 3.6%), which represent a significant part of the petrochemicals market.
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There was nevertheless some expansion in 2013, with CPC bringing its new 700,000tpa cracker at Linyuan into commercial operation in Q313. The facility replaced the 230,000tpa No.3 cracker and also includes capacities of 430,000tpa propylene, 90,000tpa benzene and 130,000tpa butadiene. However, the closure of 500,000tpa capacity in 2015 will ensure that Taiwan ends the forecast period with just under 4mn tpa of ethylene capacity. This may well lead to Taiwan becoming a net importer of ethylene over the medium term, possibly from mainland-based complexes that Taiwanese petrochemicals producers intend to develop following a relaxation of the rules on investment in the PRC.
BMI notes the following trends going forward:
- The recovery in Taiwan's construction activity is proceeding more slowly than previously expected, putting downward pressure on construction-related plastics, particularly PVC. We have revised down Taiwan's construction growth forecasts for 2014, with real growth for the sector expected to reach 1.9% (previously 2.9%).
- The automotive industry - a barometer of engineering polymers and rubber consumption - is experiencing a downturn. Due to our expectation for domestic vehicle sales to remain weak in 2014, we have downgraded our 2014 auto production growth forecast to -0.5%, to 333,000 units, from 1.2% previously.
- Taiwan's score fell 0.5 points this year to 69.5 on the back of a deterioration in market risk ratings as the country's ageing, naphtha-fed petrochemicals industry struggles to compete in a market where prices are falling and costs rising. It remains in sixth place in BMI's Petrochemical Business Environment Ranking for Asia, 0.2 points behind Thailand and 2.9 points ahead of Malaysia.
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