Formosa Plastics to ramp up steel, chemical output

The Formosa Plastics Group (台塑集團), the nation's biggest diversified industrial conglomerate, plans to spend US$9.3 billion to start producing steel in Taiwan and boost chemical output in China to bolster earnings.

The Taipei-based conglomerate intends to invest at least NT$135 billion (US$4.3 billion) to build a steel mill and as much as US$5 billion on a chemical plant in China, said Lee Chih-tsuen (李志村), president of Formosa Plastics Corp (台塑), a unit that had record profit last year on soaring petrochemical sales.

Formosa Plastics wants to benefit from a shortfall in the country's steel supply and is expanding in China to take advantage of demand for raw materials to build houses, make cars and produce electronics in the world's fastest-growing major economy. Taiwan is developing a surplus of chemical production, prompting Formosa Plastics to pursue growth abroad.

"There's still a very big shortage in China" of petrochemicals, Lee, 69, said in a March 30 interview. "There won't be any problem absorbing the output of several plants."

The conglomerate is negotiating with the government to end a ban on Taiwanese companies building plants in China to make ethylene, used in plastics and textiles, he said. China produces about 38 percent of the ethylene it needs, Lee said.