Thu, Jul 28, 2011 - Page 12 News List

Formosa faces pressure over safety

Staff Writer, with CNA and Bloomberg

Firefighters put out a fire caused by a gas leak at a Formosa Plastics Corp factory in Yunlin County on Tuesday.

Photo: Chen Tsan-kun, Taipei Times

The government threatened yesterday to put on hold Formosa Plastics Group’s (台塑集團, FPG) investment applications at home and abroad if it did not improve factory safety.

The Ministry of Economic Affairs has yet to approve any of FPG’s applications to invest in China so far this year and said it would have “reservations” over granting approvals in the future should the group continue to be plagued by safety issues.

The warning came one day after a fire occurred at the group’s petrochemical complex in Mailiao (麥寮) in Yunlin County, the fourth fire at the site this year.

Six plants owned by group subsidiaries Nan Ya Plastics Corp (南亞塑膠) and Formosa Plastics Corp (台塑) in the Mailiao complex were affected by two fires in May and were later ordered by county authorities to suspend their operations starting last month for safety checks.

Two of Nan Ya Plastics’ ethylene glycol plants and one Formosa Plastics factory were allowed to resume production earlier this month, and the county government was scheduled to review on Friday an application from Nan Ya Plastics to reopen three other plants that were shut down temporarily.

However, the company may now face further delays in resuming operations after the latest fire.

The fire was extinguished on Tuesday night after one-and-a-half hours, the Yunlin County fire department said yesterday.

No one was hurt and the blaze, caused by a pipeline gas leak, did not spread to the plant, it said. None of the plants were damaged, Frank Fu (傅陳卿), a Taipei-based spokesman for the group, said by telephone.

The Mailiao site, accounting for about half of the group’s sales, includes an oil refinery, three ethylene plants and downstream units capable of producing petrochemical derivatives found in imitation leather and plastics.

“The latest blaze may affect progress of output resumption at plants that haven’t started” after the previous fire as the local government reviews the company’s application to resume production, Willie Tang and Tony Chen, Taipei-based analysts at Jih Sun Investment Trust Co (日盛投信), wrote in a report yesterday.

The group may be forced to reduce output of some chemical products if Formosa Petrochemical Corp delays restarting its No. 1 naphtha cracker, they said.

“We expect the fire to weigh on the share prices of the Formosa sisters in the near term,” Jeremy Chen and Lily Chen, Taiwan-based analysts at Morgan Stanley, said in a report yesterday.

“Formosa Group’s safety record has been tarnished and investor confidence in management execution is fading,” they said.

Formosa Plastics Corp shares dropped 3.2 percent and Nan Ya Plastics shed 2.56 percent to NT$80 yesterday, while the benchmark TAIEX climbed 0.26 percent.

“We are more concerned about potential actions by the local government/regulators than the actual monetary damage for repairs and lost production,” Tommy Wong and Willy Chen, Taipei-based analysts at Goldman Sachs Group, said in a report yesterday. “Given the latest incident, we think approval could be delayed further.”

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