Asian plastics in the bag

01 March 1996 00:00  [Source: APC]

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North America and western Europe's dominance in plastics activity is declining in favour of eastern Europe, Latin America and Asia. Naresh Gupta looks at the opportunities.

THE MOVEMENT of plastics resins and fabricated products throughout the world is a multi-billion dollar business with thousands of resin suppliers, manufacturers, distributors, and machinery companies. Economic, political and demographic changes over the past few years will cause the market to continue growth to 2000.

Apparent consumption of world plastics will grow from 112m tonne in 1995 to 150m tonne by the year 2000, resulting in an annual average growth rate of 6%. While this represents a decline from growth in previous decades, it represents a healthy increase compared to other material industries, according to a BCC study entitled: 'World plastics: Opportunities'.

During this period, world imports will play a more important role in plastics activity. The import penetration ratio will rise from 31% in 1994 to 35% in 2000. The implication, says the report, is that countries increase production to meet increasing demand. Meanwhile, global export dependency will maintain its ratio of 33%.

The scenario of the world's plastics activity in 2000 is best illustrated by the changes on a regional basis. The study, explains that the dominance of North America and western Europe is declining in favour of other regions. During the next five years, eastern Europe, Latin America and Asia will increase their global share of production by 6%, while North America and western Europe decline by that amount.

However, consumption share does not accurately depict the situation in Asia. While Asian consumption is forecast to grow at about 8%/year, its imports are growing at 13%/year and its exports are increasing by 11%/year. The high growth in exports is restricting apparent Asian consumption.

Such is the scenario in which Asia will become more of a factor in the world trade of plastics than in consumption. In 2000, Asia will still have the lowest per capita plastics consumption in the world, despite rapid growth in production and foreign trade.

Hoechst of Germany sees the growth of polymers and plastics in Asia (except for Japan) continuing unabated with the growth rate of technical polymers between 8% and 10%, well above those for the Americas and Europe.

In Japan the strong yen is making life difficult, says Hoechst, particularly for its affiliate Polyplastics. In addition, the electronics industry and increasingly the automotive industry is shifting its production away from Japan mainly to the Asean countries.

Japan's weak economy is also slowing down its business, says Hoechst. 'We believe, however, that we are well prepared for the shifting markets in East Asia. We have granted Polyplastics sales rights and licences so that it can act as a supplier across the whole region in addition to doing its regular business.'

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Hoechst says it has succeeded in raising prices again since December 1994, although it has not returned to the levels of 1989. In the US the company has been able to keep prices at 1995 levels, while in east Asia Hoechst undertook price increases. In markets outside Japan this has meant a price decline in yen terms and imposes a burden on Polyplastics' results - the company can not increase its prices because of the strong yen. A task for the future will therefore be to build production plants outside Japan. Hoechst already has a polyacetal facility in Taiwan.

The world market for technical polymers, according to Hoechst, in volume terms is around 3m tonne/year. The growth rates vary greatly, depending on the product and the degree of maturity of the marketplace.

In western industrial countries the growth rate is some 3-4%, while in Asia it is noticeably higher at 8-10%. In the case of high-performance polymers such as Fortron and Vectra some growth rates are between 10% and 15%.

With a world market share of around 10%, Hoechst claims to be a major player with ambitions to build up its share through expansion. For instance, it is looking to increase its regional capacity and innovate specific product types. This would mean opening up new fields of application, if necessary through strategic alliances.

Perstorp Plastic Systems, a business area within the Swedish-owned chemical and plastics group Perstorp, has already moved along the strategic alliance route with the formation of a marketing and production jv with Tre-Atthaboon Industry Co in Thailand. Perstorp's partner is said to be the largest plastics company in the field of materials handling products in Thailand with a turnover of US$45m.

The joint venture, Tre-Atthaboon Perstorp Co, will invest $20m over three years and establish its own production facilities in a new industrial zone in the province of Rayong. Perstorp will hold a 51% share in the venture with the balance held by the Thai partner. The jv has the exclusive right to market and produce Perstorp's complete product ranges within materials handling and waste handling systems for the Thai market. The venture recently won its first major contract for 30 000 plastic waste handling containers from Bangkok.

Another company that has been pressing ahead with its Asian investment is BP Chemicals. The company has signed a joint venture agreement with the Polyethylene Corp to build what is said to be Philippines' first polyethylene plant. BP holds a 30% stake in the venture; 50% is held by Bataan Polyethylene Corp; 10% by the Philippines National Oil Co and Petrochemical Development Corp and 10% by Sumitomo of Japan.

The proposed plant will have a capacity of 200 000 tonne/year and will use BP Chemicals' Innovene technology. The plant is scheduled to come onstream in 1998 and the next phase of work involving project financing and engineering design is expected to be completed by the end of Q3 1996.

BP Chemicals has also supplied its Innovene technology to the China National Technology Import and Export Corp (CNTIC) and Xinjiang Ethylene Complex (XEC), a subsidiary of the China National Petroleum Corp which took charge of the facility in December 1995.

The plant, which is based on locally supplied ethylene feedstock and located at Dushanzi, Xinjiang in north west China, was said to be commissioned faster than any other BP licensed polyethylene plant, enabling XEC to produce seven different polyethylene grades for film and injection moulding ten weeks ahead of schedule.

The design and construction of the plant was completed by Italian contractors TPL/Technipetrol over a three-year period. BP Chemicals has 21 licences for its polyethylene technology in 15 countries for plants with a combined manufacturing capacity of more than 3m tonne/year.

GE Plastics of the Netherlands is investing $50m in a multi-product thermoplastic manufacturing facility in Guangdong province and opening a compounding plant in Baroda, India, along with an application development centre at it Indian headquarters in Delhi.

Further expansions are planned in Chiba, Japan and the compounding plant in Singapore. GE Plastics has committed a great deal of effort to strengthening its range of engineering polymers particularly for the CD market and the optical industry by focusing on the production and marketing of optical grades of Lexan polycarbonate resins.

This commitment has led to an investment in a dedicated Lexan OQ (Optical Quality) production line at its Bergen op Zoom facility in the Netherlands. This line is expected to come in to operation at the end of Q3 1996 and would be the third such line to be set up. The previous two are at Mt Vernon in the US and Chiba, Japan.

Lexan OQ resins are used for the manufacture of optical discs such as CD audio, CD ROM, CD-R and for protective, corrective and industrial lenses. Another application includes polycarbonate sheets glazed in Lexan Margard to replace external security shutters. These are said to be virtually unbreakable as well as mark and mar resistant.

BASF of Germany saw its Southeast Asian business growing by almost 9% in 1994 and expects 1995 to be no different. Consumption in Southeast Asia is also expected to rise more sharply than in Europe and North America.

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In important customer sectors - for instance the automotive, electrical and electronics industries - BASF intends to press forward with its internationalisation in selected business sectors. Plans for expansion in Asia are very much on the cards and in engineering plastics this has certainly been the case. Its polystyrene joint venture in Korea, Hyosung-BASF underwent a 50 000 tonne/year capacity expansion late in 1994 and was on-line by April 1995.

In China at Yangzi-BASF Styrenics (YBS), construction was started on the production unit for 100 000 tonne/year of polystyrene as well as the initial products styrene and ethyl benzene.

In fact, east Asia will be the focal point of strong growth in styrene demand through the year 2005 according to international consultancy Chem Systems. 'Driving the region's forecast 9.3% styrene consumption rate are its advancing economies, increasing standards of living and emerging prominence as an exporter of finished products,' says Chem Systems.

East Asia will also be the site of most of the world's styrene capacity expansion, based on the expected onstream addition of more than 2.5m tonne/year by 1998. This increase in capacity will lower global operating rates from the unprecedented highs of 1994 and significantly alter trade patterns and profitability of the traditional exporting countries.

Styrene experienced an increase in global consumption of 9.6% in 1994. Strong demand cut across all styrenic derivatives, particularly polystryene and ABS, which together account for 75% of global styrene consumption. In contrast lower than anticipated growth occurred in 1995 through inventory adjustments and unexpected reduction of imports to China following the closing of its southern border.

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