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Taiwan petrochemical industry overview

Hydrocarbon Engineering,

Taiwan’s petrochemicals industry has faced roller coaster market conditions for the past 18 months mirroring trends in the fortunes of the global petrochemicals sector, which has entered a cyclical downturn. After production and demand for petrochemicals in Taiwan showed robust growth in the first half of 2008, a substantial slowdown followed in the second half resulting in an overall decline in consumption for the year as a whole.
2009 has seen a pick up in business from March onwards as petrochemical prices have improved and customers have increased orders to fill depleted inventories. Taiwanese petrochemicals producers are reporting improved margins and are optimistic sales will continue to grow during the second half of the year.
‘Starting the second quarter 2009 things have been getting better,’ commented J. H. Shieh, executive manager of the Petrochemical Industry Association of Taiwan (PIAT), ‘Petrochemicals production saw a reduction from the third quarter 2008. Market demand reduced 50% and continued until the year end. The average plant operating rate in Taiwan was 50%, particularly the ethylene crackers. Prior to last September the average operating rate was up to 100%.’
‘In Q1 2009 the market here rebounded somewhat. The average plant operating rate increased to 65% for olefins and aromatics. In Q2 this year it rebounded to an 85% to 90% operating rate as normal. Starting the second quarter this year things mostly have been getting better.’
Faced with a sharp downturn in business, many Taiwanese petrochemical manufacturers altered their annual plant maintenance schedules to be ready for any upturn in business.
Facing the financial crisis
The impact of the global economic downturn has ended a five year growth period for Taiwan’s petrochemicals industry with domestic production and demand for basic materials and intermediate products registering a drop for the first time since 2003.
Taiwan’s total imports of petrochemical products fell 14.8% in 2008 year due to substantial decrease in demand during the second half of the year. However, exports of petrochemicals grew 5.1% overall in volume in 2008 as manufacturers looked overseas to offset some of the fall in domestic demand.
A major transformation
Taiwan’s petrochemicals industry has undergone a major transformation since the mid 1990s switching from domestic orientated to export orientated production. Over the past decade most downstream demand for petrochemical products has moved out of Taiwan into China and Southeast Asian countries where Taiwanese converting companies have moved their factories to take advantage of lower labour rates and overheads.
‘Taiwan is a small island but the eighth largest petrochemical producer in the world. Chinese Petroleum Corporation and Formosa Petrochemical Corporation have a combined 4 million tpy ethylene capacity,’ Shieh said, ‘This means a huge petrochemical capacity in a small country. But some expansions are delayed so we will lag behind Thailand and Singapore from next year. Thailand will increase its petrochemicals capacity next year after its new plants are commissioned.’
Investing in China           
Warming relations with China have lifted Taiwan’s economic outlook since the beginning of this year and the likelihood is growing of greater Taiwanese involvement in the mainland’s petrochemical sector.
While Taiwan’s downstream converters have invested heavily in China for more than a decade, the previous Chen administration blocked proposals for major upstream investment in the mainland. This policy has changed under the new president and Taiwanese petrochemical firms are proposing to invest in several major mainland upstream projects.
Basic petrochemical materials are produced by two companies in Taiwan: Chinese Petroleum Corporation (CPC) and Formosa Petrochemical Corporation (FPCC), which is part of the Formosa Plastics Group. Both companies produce olefins and aromatics based mainly on captive feedstocks from their refineries.

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