Although costs are likely to be subdued as a result of low naphtha costs and cheaper Chinese ethylene, there are major downsides to the external competitiveness of Taiwanese petrochemicals producers going forward. With the Chinese petrochemicals industry set to witness major expansion amid slower rates of demand growth, as well as with the US stepping up capacity to take advantage of its own ethane resources, BMI cautions that margins will be squeezed at Taiwanese facilities throughout the forecast period. Signs of a serious pick-up in global economic activity are still absent; and languishing external demand continues to place considerable weight on demand for Taiwanese petrochemicals goods.
Taiwan's reliance on naphtha streams, derived from refining imported crude, has helped support margins to some extent as the cost of crude has declined, although refinery capacity remains relatively old and has been reduced in recent years. Falling naphtha costs have offset the effects of falling export orders and declining competitiveness. The proportion of ethane in the mix could increase with the expansion of LNG terminals, while refinery expansion is unlikely over the foreseeable future. Increased flexibility in feedstock supply could help improve Taiwan's competitiveness in petrochemicals, although there is a question of the amount of investment needed to enable ethane to be used in the mix.
The Taiwanese petrochemicals industry witnessed a contraction of 1.1% in 9M16, indicating that the sector was affected by reductions in refining and petrochemicals capacities carried out in recent years. Although plastic resins production grew 2.9% over the period, there was a 3.3% decline in plastic products output.
With just under 4mn tonnes per annum (tpa) of ethylene capacity, Taiwan is likely to become a net importer of ethylene over the medium term, possibly from mainland-based complexes that Taiwanese petrochemicals producers intend to develop following a relaxation of the rules on investment in the PRC. However, lower ethylene prices and a decline in the value of the yuan will help downstream polymer producers maintain buoyant margins, even if they are reliant on Chinese feedstock.
Taiwan's crude oil distillation capacity from four refineries was about 1.31mn barrels per day (b/d) in 2015. However, the closure of the 220,000b/d Kaohsiung refinery by the end of the year will likely bring the country's crude oil distillation capacity to 1.09mn b/d by the 2016.
The closure of 500,000tpa ethylene capacity in 2015 will ensure that Taiwan ends the forecast period with just under 4mn tpa of ethylene capacity. This may well lead to Taiwan becoming a net importer of ethylene over the medium term.
The construction industry will grow by 3.0% in 2017, with corresponding support for construction-related polymers, particularly PVC. Meanwhile, the automotive industry - a barometer of engineering polymers and rubber consumption - has been affected by the slowdown in China. Total vehicle production grew by an estimated 1.6% in 2016 and should rise at an annual average of 1.1% over our 2016-2020 forecast period. Total vehicle production will reach 370,823 units by 2020, staying well below its peak levels of 446,345 units in 2005.
Taiwan's Risk/Reward Index score fell 0.3 points between 2016 and 2017 to 68.8, on the back of a deterioration in risk scores (as a result of over-supply on the Asian market amid China's slowdown) as well as the country's ageing, naphtha-fed petrochemicals industry, which is struggling to compete in a market where prices are falling and costs rising. However, it remains in fifth place in the regional rankings. It is now 1.7 points behind Singapore and 0.5 points ahead of Thailand.
The Taiwan Petrochemicals Report has been researched at source, and features BMI Research's market assessment and independent forecasts for key petrochemicals sub-sectors. The report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing companies by products and services, sales, market share, investments, projects, partners and expansion strategies.
BMI's Taiwan Petrochemicals Report provides industry professionals and strategists, sector analysts, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Taiwanese petrochemicals industry.
- Benchmark BMI's independent petrochemicals industry forecasts to test other views - a key input for successful budgetary and planning in the Taiwanese petrochemicals market.
- Target business opportunities and risks in the Taiwanese petrochemicals sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Taiwan.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering the petrochemicals markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the petrochemicals sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
- Energy: Oil production (‘000 b/d), oil consumption (‘000 b/d), net oil exports (‘000 b/d), gas production (bcm), gas consumption (bcm), net gas exports (bcm), oil refinery capacity (‘000 b/d).
- Petrochemicals: Ethylene capacity (‘000 tpa), ethylene production (‘000 tpa), ethylene consumption (‘000 tpa), polyethylene capacity (‘000 tpa), polypropylene capacity (‘000 tpa), polyvinyl chloride capacity (‘000 tpa), polyolefins consumption (‘000 tpa).
- Oil Products Prices: Price forecasts for all major oil-based products (USD/bbl) at major global energy trading hubs.
- Economic: Nominal GDP (USDbn), real GDP growth (%), GDP per capita (USD), population (mn), unemployment (%), exchange rate (against USD).
BMI’s Petrochemicals Risk Reward Index
BMI’s Risk Reward Indices provide investors (both corporate and financial) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Structure, size and value of the industry sector; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Industry Trends & Developments
Evaluation of company and sector-wide developments, including key projects (as well as expansion plans), latest company financial details and proposed international ventures.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Global & Regional Market Overview
Analysis of the key trends driving the global industry, including worldwide output/capacity and demand analysis across ethylene, polyethylene, polyvinyl chloride, polystyrene, polyethylene terephthalate and polypropylene. The regional analysis looks at the implications of local and global trends on specific company activity.
Sub-sectors covered by the Petrochemicals Reports include:
Oil & Gas, Oil Refining, Olefins (ethylene, propylene), Polyolefins (polyethylene, polypropylene), Polyvinyl Chloride, Polystyrene
Please note – not all country Reports cover all sub-sectors – see website for details.
The Petrochemicals Market Reports are based on a network of primary sources, such as multilateral organisations (ACC, APLA, Cefi c, ICCA, ICMA), national chambers of commerce and industry, national statistical offi ces, government ministries and central banks, and multinational companies.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.