The gas pipeline blasts in Greater Kaohsiung last week will have a very limited impact on the economy, as domestic firms can make up for disruptions in supply at LCY Chemical Corp (李長榮), foreign banks said yesterday.
“We maintain our forecast for Taiwan’s GDP growth at 3.9 percent this year on expectations that authorities should soon help the southern municipality get back to normal operations,” said Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank.
The chemical industry contributed US$1.89 billion (NT$56.79 billion) to the nation’s exports last month, accounting for 7.1 percent of the total, data from the Ministry of Finance showed. For the first seven months, the sector generated US$13.04 billion, or 7.2 percent of overall exports.
LCY Chemical has halted operations as government officials suspect the company’s worn pipelines caused the explosions that killed 30 and injured 310.
Greater Kaohsiung is home to companies that produce 20 percent of the industry’s output and the disruption might weigh on petrochemical exports in the short term, Phoo said.
China Petrochemical Development Corp (CPDC, 中石化) and Formosa Petrochemical Corp (台塑石化) could produce more to fill the shortage if necessary, he said.
The Australia and New Zealand Banking Group (ANZ) voiced concerns that the disaster might heat up debate about the role of the petrochemical sector in the economy, as some Greater Kaohsiung residents have pressed for the relocation of chemical plants.
The chemicals industry — including the upstream petrochemical products, mid-stream finished material and downstream plastic products — represents 15 percent of industrial outputs, ANZ Hong Kong-based economist Raymond Yeung (楊宇霆) said.
If the production facilities in Greater Kaohsiung are completely closed for one quarter, the nation’s GDP might decline by 0.17 percent, as the area houses four of the seven major petrochemical refineries and cracking facilities in Taiwan, accounting for 30 percent of the industry’s output, he said.
“The gas blast poses a risk to our forecast of 3.6 percent GDP growth for this year,” he said.
Petrochemical industries include basic raw materials, synthetic plastics and rubbers, synthetic fibers and other petrochemical products, Yeung said.
These raw materials are used for processing and the final products are commonly used in the nation’s key industries such as panel manufacturing, semiconductors, machinery, steel manufacturing, and other sectors such as the footwear and textile industries, he added.
Fortunately, reconstruction efforts and government relief measures should boost domestic investment and offset the adverse effect of interrupted production, Yeung said.
The city government has proposed a preliminary reconstruction budget of NT$1.9 billion, or 0.05 percent of GDP, the economist said, adding the government is to provide relief measures to help households rebuild their damaged homes.
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