Tue, Sep 10, 2013 - Page 13 News List

Formosa Plastics cautious on China naphtha cracking

By Camaron Kao  /  Staff reporter

Formosa Plastics Group (FPG, 台塑集團) will cautiously consider whether it will put money into naphtha cracking in China, the company said yesterday, after local media reports said the government may lift its petrochemical investment ban on Taiwanese investment.

“The naphtha cracking business is not as lucrative as before, and the Chinese government is not encouraging investment as much as five years ago,” Formosa Chemicals & Fibre Corp (台灣化學纖維) president and general manager Hong Fu-yuan (洪福源) said by telephone yesterday.

Formosa Chemicals is one of Formosa Group’s four main units.

RESTRICTIONS

The Ministry of Economic Affairs submitted the amendment of investment restrictions in China to the Cabinet last week, which would allow Taiwanese companies to invest in naphtha cracking in China if it is approved, according to the Chinese-language Commercial Times (工商時報).

The Cabinet is scheduled to pass the bill this week at the earliest, the report said.

Taiwanese companies making such investments are required by the government to have at least 50 percent of the shares, to invest in high value-added petrochemical projects in Taiwan, to remit money to China in separate years, not to fire employees and to ship a fixed proportion of ethylene to Taiwan, according to the report.

INVESTMENT

Hong said the group planned to invest in naphtha cracking in China 10 years ago.

“We and other companies in the petrochemical industry had communicated with the government over the issue many times, but to no avail,” he said. “Now, the best time for naphtha cracking investment there has passed.”

Lin Keh-yen (林克彥), vice president of Formosa Petrochemical Corp (台塑石化), another main unit of the group, said it is still positive news if the government can remove the restrictions, which will give the group more room to maneuver if the investment becomes profitable again in the future.

Lin said the group has been constantly evaluating the pros and cons of such investment.

He said a clear assessment would be possible only after the government releases details on the policy.

A source at Formosa Plastics Corp (台塑公司), the flagship company of the group, who declined to be named, said it is still too early to discuss possible investment.

“It requires not only the approval of the Taiwanese government, but also approval from China for us to invest,” the source said.

According to the source, it might be a problem for the Chinese government to accept the condition that Taiwanese companies must have at least 50 percent of shares in the investment.

LONG-TERM BENEFIT

SinoPac Securities Co (永豐金證券) said yesterday that the easing of the regulations would benefit the Formosa group in the long term as the group has many downstream petrochemical companies in China requiring naphtha-cracking products as their raw materials.

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