The nation’s chemical industry might continue to feel the impact of softening global demand for the rest of the year, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
“Sales this year might decline slightly from last year, dragged by lower-than-expected global demand for chemical products,” TIER analyst Lo Kai-chen (羅凱禎) said at a conference in Taipei.
Lo said that Beijing is trying to address overcapacity in China’s industrial sectors, which has led to lackluster demand for chemical products.
Domestic demand has also not completely recovered and overall industrial production is unlikely to improve significantly by the end of this year, she said.
“Sales of chemical products to downstream electronic companies might slow later this year,” Lo said, adding that demand from the plastics and textile industries would also be weak.
In the first half, chemical industry sales dropped 10.3 percent year-on-year to NT$72.6 billion (US$229.24 million).
However, gross profits during the same period increased 10.38 percent to NT$15.5 billion annually, which TIER attributed to local firms’ product differentiation strategy.
For instance, some chemical companies have tapped into “green” businesses to produce environmentally friendly products with higher margins, Lo said, adding that such products include “green” coatings, non-toxic adhesives and bio-based surfactants, she said.
It is mostly low-end Chinese chemicals that are in oversupply. Taiwanese firms’ product differentiation strategies have helped them retain advantages while competing with global rivals.
China is the largest importer of Taiwan’s chemical products and accounted for 43 percent of the local industry’s total exports last year, TIER said.
“However, sales contributions from China are declining, while revenue from Southeast Asian nations is rising,” Lo said, adding that an increasing number of local companies are expanding into emerging markets, including Vietnam, Malaysia and India.
TIER’s latest survey of the local manufacturing sector indicated that business sentiment improved last month, as the nation’s exports rebounded.
The survey released yesterday indicated that the manufacturing composite index rose 1.97 points to 98.63 last month after falling in June.
However, TIER Economic Forecasting Center director Gordon Sun (孫明德) said that although sentiment in the manufacturing sector rebounded, only the semiconductor segment saw an increase in shipments.
In the local service sector, sentiment remained cautious, with the transportation, logistics and warehousing segment maintaining a conservative outlook amid rising global crude oil prices, TIER said.
The composite index for the local service sector last month fell 1.17 points month-on-month to 84.37, TIER said.
Additional reporting by CNA
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