Nan Ya to invest US$270m in new Chinese plants

Nan Ya Plastic Corp (南亞塑膠), the biggest publicly traded petrochemical maker in Taiwan, said it will spend US$270 million to build chemical and electronics factories in China as it bets heavily on rising demand global demand.

The company expects sales to rise in China after the country joined the WTO, said Nan Ya spokesman David Tsou.

He didn't say when the investments will be made. The company sells polyvinyl chloride products in China.

China is required to cut import tariffs and open up its market as part of its WTO entry, which has attracted manufacturers who can hire workers at cheaper rates and sell products to other firms in the world's most populous country.

"Taiwanese petrochemical producers are re-locating to China and they may be able to ship their products at a cheaper cost to China than Korean or Japanese producers if WTO leads to direct trade between Taiwan and China," said Cecilia Liu, an analyst at brokerage CLSA Ltd in Taipei.

China cut its import tariff for plastics to around 12 percent on Jan. 1 from 16 percent and will later remove all import quotas on petrochemical products, she said.

China's economy grew by 7.3 percent last year as some other Asian countries, such as Japan and Singapore, slid into recession.

The growth is fueled by spending on consumer goods and construction materials, increasing demand for plastics and other chemicals, manufacturers said.

Nan Ya Plastic has so far invested US$100 million in China to build factories in Shanghai, Chongqing, Xiamen and Guangzhou.

"Tariffs in [China] are going down so that will mean the cost of our products can be cheaper and we can sell more," Nan Ya's Tsou said in a phone interview.

The reduction in import tariffs may prompt China's manufacturers to turn to Taiwan as a source of raw materials, as imported material becomes cheaper.

That has helped lift petrochemical shares in Taiwan.

Nan Ya shares gained 6.5 percent over the past week, while Formosa Plastics Corp (台塑) rose 11 percent in the same period. The Taiwan Plastic Index has surged 42 percent since November, when the WTO agreed to admit China and Taiwan.

Some petrochemical stocks also gained on a decline in the price of crude oil, the raw material used in making plastics.

Crude oil on the New York Mercantile Exchange has fallen 19 percent over the past six months.

Taiwan Styrene Monomer Corp (台苯), which produces the base materials used to make polystyrene, rose NT$1.20, or 7 percent, to NT$18.40.

Taiwan Polypropylene Co (福聚) gained NT$1.70, or 6.7 percent, to NT$27.00, a 52-week high.