Popular Posts

Tuesday 14 February 2017

Focus on Taiwan chemical industry

In an interview, Bowei Lee, Chairman of Taiwan Chemical Industry Association (TCIA) and also Chairman of LCY Chemical Group with Chemical Today magazine speaks about the evolution, growth and challenges of the chemical industry in Taiwan.
Evolution of the chemical industry in Taiwan.
Taiwan’s chemical industry, especially petrochemical sector, is a backwards integrated industry, in which the fast-growing downstream business such as plastics or rubber products has supported the growing petrochemical industry since the 1970s. 
Taiwan’s chemical output, roughly at $150 billion around 2013-2014, has been accounting for almost 1/3 gross production value of Taiwan’s manufacturing.  Petrochemical output accounts for about 45 percent of the total chemical output. Its ethylene capacity has been around 4.5 million tonnes, ranking on the top ten nations in the world.  
However, with the impact of oil price and the competition from Mainland China, Taiwan’s chemical out has had a significant decline since 2015.
Areas with growth potential in Taiwan related to the chemical industry. 
Taiwan’s chemical output has only 3 – 10 percent of added value, which is much lower than the average added value of > 20 percent in the developed countries. 
Taiwanese government, therefore, has started the chemical industry upgrading movement since 2011, by integrating the national resources with R&D capabilities from the private sector. Its purpose is to develop the higher value-added chemical products and its applications such as C5 series applied to the elastomers or medical/ consumer products and special grades of existing commodity chemicals such as electronic chemicals applied to the IT industry. 
Policies to support an international trade for the chemical industry.
50 percent of Taiwan’s chemical output has been for export, in which half goes to Mainland China. FTA agreement in the region is becoming the biggest concern for most chemical companies. The tariff of most countries importing Taiwan’s chemical products is normally ranging 5 ~ 7 percent, which almost kills the all the profit of the products. The bilateral free trade agreement, therefore, becomes the target for Taiwanese government’s policy.  
Taiwan has been aggressively promoting the regional FTA including “Economic Cooperation Framework Agreement, ECFA”, “Trans-Pacific Strategic Economic Partnership, TPP” and “ASEAN Framework for Regional Comprehensive Economic Partnership; RCEP”.
The new government led by President Tsai further promotes “New South-Forward Policy” trying to reduce the direct impact from Mainland China. The bilateral FTA agreements with ASEAN nations, India, Arabic nations, Turkey and South Africa are therefore becoming the targets of new international trade policy. However, the progress is very slow due to the influence/ pressure from Mainland China.
Mergers & acquisitions landscape for the chemical industry in Taiwan.
Most of Taiwan’s chemical manufacturers are the medium and small entrepreneurs, which are in small scale size versus the very big size of the multinational companies. Taiwan is now facing highly competitive threats from the multinational companies who have a highly integrated supply chain. Many of these Taiwanese manufacturers, therefore, have increased the overseas investment size to reach the local markets, especially in China. It could help its integrated business close to the markets to enhance its competitive advantages.
Many of Taiwan’s chemical manufacturers are run as a family business, who are conservative especially in M&As or joint ventures. However, many of them are being taken over by the second or even the third generation who are more open to any opportunity that they can reach out to. It is believed that more M&A or joint venture in cooperation with international partners can be expected in the future.
Challenges faced by the chemical industry in Taiwan.
Taiwan chemical business has been facing the issues of environmental protection and industry transformation to the higher value-added business. One end is the strong local protest to build the new chemical plants due to the poor image from the public; another end is that most manufacturers are poor in developing the new technologies for the business transformation to the high value added products. 
Furthermore, the Taiwanese government has developed the new industrial policy 5+2, namely “Green Energy”, “Asian Silicon Valley”, “Defense Industry”, “Smart Machinery”, “Biomedical Technology” plus “New Agriculture “and” Circular Economy”, which will be provided with many incentives by the government. As such, Taiwan’s chemical manufacturers have to find the niches under the government’s new industrial policy.  Otherwise, many of them will be forced to move out from Taiwan in order to survive.
© Chemical Today magazine 
Read More: Focus on Taiwan chemical industry

1 comment:

  1. Are you searching for Best Specialty chemicals industry ? Eastarchem is the Best Specialty chemicals industry. The specialty chemicals industry is now trying to recover its margins by implementing price increases to recompense for higher R&D, energy, and raw material costs.

    ReplyDelete