Asia PC makers concerned by SABIC acquisition

23 May 2007 10:11  [Source: ICIS news]

By Chan Jingyi

 

Asia PC sources fear SABIC deal may crush marketSINGAPORE (ICIS news)--A number of regional polycarbonate (PC) suppliers said on Wednesday they are very concerned by the recent $11.6bn acquisition of GE Plastics by Saudi Arabian Basic Industries Corp (SABIC) and fear intense rivalry in the market.

 

Several Asian PC industry players foresee major competition from GE Plastics in the next one to two years, now that it can be assured of strong financial support and a reliable access to cheap raw materials, especially benzene, from SABIC, the world’s largest chemical company by market value.

 

“As it is, GE Plastics dominates the PC market in China. They can supply up to 50% of China’s annual PC consumption via their wide distribution network,” a Japanese producer said.

 

“We will be monitoring the situation closely from now on, in case of any aggressive marketing strategy from GE in subsequent months,” he added.

 

Several other PC suppliers voiced similar concerns, expressing worry that SABIC's upstream advantage and GE Plastics' global dstribution network would pose a formidable threat to them in the highly competitive China market.

 

“The Chinese market is very volatile. Any price movement, even a slight downward adjustment, can result in a price war. In such a scenario, smaller players are pushed out of the game immediately by the key sellers,” a Taiwan-based supplier said.

  

Another concern was SABIC’s reported intention to build a 260,000 tonne/year PC facility in Saudi Arabia, aimed at supplying the Chinese market.

 

Some regional sellers acknowledged there had been a glut of PC supply in China since last year, which had exerted tremendous downward pressure on prices.

 

Oversupply was brought about by consistently high import levels and the opening up of domestic production facilities by BayerMaterialScience and Teijin Polycarbonate in the second half of 2006, they said.

 

Coupled with increasing feedstock bisphenol-A costs and strong buyers’ resistance to hikes, some Asian PC sellers said the industry had been hit by squeezed profit margins.

 

Meanwhile, a minority of sellers remained unfazed by news of the acquisition by SABIC of GE Plastics.

 

“It is too early to discern if there is any significant impact on the China market because the acquisition is only two days old. Nonetheless, we will be watching the situation closely,” a Korean supplier said.

 

($1 = €0.74)  


By: Chan Jingyi
+65 6780 4359



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