Taiwan's petrochemical and plastics producers are upbeat about future demand, thanks to the voracious appetite for raw materials developed by China. But they are worried rising oil prices could hit their businesses and affect profitability.
``This is naturally worrying both processors and raw material producers who are seeing their profitability affected as a result of this development,'' said Helen Wu, project manager for durable goods at the Taiwan External Trade Development Council in Taipei.
Meanwhile, Taiwan has embarked on major expansion, said J.H. Shieh, executive director of the Petrochemical Industry Association of Taiwan.
``Taiwan has been successful in developing the China market, which is the largest importer of chemicals,'' he said, noting that China imported some 10 million tons of polyethylene, polypropylene and PVC in 2003. ``Although China also produces its own plastics raw materials, the quantity produced is not sufficient to meet the heavy demand.''
Many say Taiwan's own domestic demand is declining and more Taiwanese suppliers are concentrating on China. Per capita plastics consumption in China is estimated to be 46-50 pounds.
Shieh estimated Taiwan's economy grew 4-6 percent in 2004. Taiwan's petrochemical industry expects the current demand-exceeding-supply situation to continue and gain steam in the coming years because of the delay faced by several new projects in China and the Middle East.
``The market will face further pressure as the petrochemical supplies from the United States will decline because of rising prices of natural gas,'' Shieh said.
China, India, Malaysia, Indonesia, Thailand, Saudi Arabia and Iran may become major suppliers of raw materials in the years to come. Iran is the largest producer of natural gas, but it needs capital to develop gas production commercially.
Shieh is upbeat about India. Reliance Industries Ltd., India's leading petrochemical company, will emerge as a key player in the global arena in the years ahead, he said. India and China will dominate the specialty chemicals sector, he added.