Ban on Chinese naphtha cracker investment eased

STRATEGY::The government encourages petrochemical firms to manufacture upstream products abroad and quality downstream products at home, an official said

By Helen Ku  /  Staff reporter

Thu, Oct 03, 2013 - Page 13

The government on Tuesday removed a ban on investment in 30 products in China, paving the way for Taiwanese petrochemical firms to invest in naphtha crackers across the Taiwan Strait.

The 30 approved items cover 23 in agriculture and seven in petrochemicals, the Executive Yuan said in a statement on its Web site.

The statement did not specify the names of the products, which were represented by product code numbers, but the Investment Commission said they include seven byproducts of oil refining.

Since Kuokuang Petrochemical Technology Co’s (國光石化) proposed naphtha cracker project failed to receive approval from the government because of environmental concerns and state-run CPC Corp, Taiwan’s (CPC, 中油) naphtha cracker in Greater Kaohsiung is due to be retired in 2015, continuing to restrict petrochemical firms from investing in China will not solve a potential shortage of ethylene supply, Investment Commission deputy executive secretary Emile Chang (張銘斌) said by telephone yesterday.

“Removing the barriers for local firms to invest in China was inevitable,” Chang said.

With the restrictions eliminated, companies can produce petrochemical products such as ethylene, propylene and butadiene in China and sell them to oil refiners like CPC and the Formosa Plastics Group (FPG, 台塑集團), Chang said.


Meanwhile, a consortium composed of seven Taiwanese companies — including Ho Tung Chemical Corp (和桐化學), LCY Chemical Corp (李長榮化學) and USI Corp (台灣聚合化學品) — is planning to develop a petrochemical complex project in the Gulei Peninsula, Zhangzhou, in China’s Fujian Province.

The government’s policy is to encourage local petrochemical companies to produce upstream raw materials overseas and improve the quality of their downstream products in Taiwan in order to protect the environment, Chang said.

Since building a naphtha cracker requires a large investment, each local petrochemical company can apply for one investment project at a time, Chang said.

He said the Ministry of Economic Affairs would also ask companies planning to set up joint ventures with Chinese partners to aim for more than 50 percent shareholding to secure their ownership in China.

Since constructing a new naphtha cracker would take at least 10 years, Chang said it might not be possible for CPC to fix its ethylene supply shortage problem by 2015, when its cracker in Greater Kaohsiung is scheduled to shut down.

“Removing investment restrictions is a way to help local petrochemical companies explore new markets and also to secure CPC’s long-term business,” he added.

Reports of the latest easing drove the plastics sub-index up 2.06 percent yesterday.

Formosa Plastics Group member Formosa Chemicals & Fibre Corp (台灣化纖) gained 3 percent to close at NT$82.40, while affiliate Nan Ya Plastics Corp (南亞塑膠) added 2.24 percent to close at NT$63.90.

Taiwan Styrene Monomer Corp (台苯) surged to its daily limit at NT$22.40, while Taita Chemical Co Ltd (台達化) closed up 3.2 percent at NT$12.85 and Grand Pacific Petrochemical Corp (國喬) moved up 5.16 percent to NT$22.40.


The government also removed some restrictions on wafer, semiconductor and panel makers buying shares in their Chinese peers, according to the Executive Yuan’s statement.