Formosa Petrochemical Corp (台塑石化), the nation’s only listed oil refiner, expects demand in the petrochemical sector to slow in the second half of this year amid China’s continuing tight monetary policy, an official said yesterday.
The worsening European debt crisis was another factor dragging down the industry’s recovery this year, the official said.
“China’s tightening measures would be the major factor for reducing market demand for petrochemical products,” chairman Wilfred Wang (王文潮) told reporters after Formosa Petrochemical’s annual shareholders’ meeting.
Formosa Petrochemical said its outlook on the oil-refining sector is more optimistic, adding that third-quarter demand for diesel oil would surge amid power shortages in China and Japan.
However, Wang voiced concern over the company’s international competitiveness, saying Singapore’s continuing capacity expansion in petrochemicals would threaten the competitiveness of Taiwanese rivals.
Singapore’s ethylene capacity now totals 2.8 million tonnes annually, but investment from several international corporations, including Shell Oil Co and Exxon Mobil Corp, could boost its capacity to 3.8 million tonnes per year, Wang said.
Taiwan’s ethylene capacity totaled about 4 million tonnes per year, according to a Petrochemical Industry Association of Taiwan (石油化學工業同業公會) annual report last year.
“This kind of capacity expansion in Singapore will be the major threat to Taiwan’s petrochemical sector, including Formosa Petrochemical,” Wang said.
Fuel transportation costs are relatively low from the Middle East to Singapore, compared with the Middle East to Taiwan, further deepening the negative influence on the local petrochemical sector, Wang said.
He added that Singapore has a geographical advantage when it comes to exporting petrochemical products to Southeast Asia, which is also a key market for Formosa Petrochemical
Despite these challenges, the company was forging ahead with capacity expansion for high-value products, planning to construct a butyl rubber plant in Ningbo, China, with a total annual capacity of 50,000 tonnes, while investing US$573.75 million in a steel plant in Vietnam, the company said in its annual report to shareholders.
“The construction of a steel mill in Vietnam will be completed in 2013, with the butyl rubber plant starting operations in 2014,” Wang said.
Shareholders also approved a plan to provide a cash dividend of NT$3.9 per common share, based on last year’s net income of NT$40.92 billion (US$1.41 billion), or NT$4.3 per share.
Shares in Formosa Petrochemical fell 2.67 percent to NT$98.3 yesterday on the TAIEX, according to Taiwan Stock Exchange’s data.
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