APIC ’08: Manufacturing may shift out of China

27 May 2008 21:46  [Source: ICIS news]

SINGAPORE (ICIS news)--China is becoming a less competitive location for both the start-up and the operation of petrochemical and downstream manufacturing plants due to such factors as rising labour costs, an appreciating Yuan and increasing cost of living, a consultant said on Tuesday at the Asian Petrochemical Industrial Conference (APIC) 2008.

China is experiencing an 18%/year loss in competitive position against the US, thus allowing countries such as Indonesia, Vietnam and the Philippines to move up and fill its shoes, said Fred Peterson, president of Probe Economics, a US chemical consultancy.

Generally, as a country’s per-capita income increases, manufacturing plays a smaller role in the nation's overall economy, he said. Therefore, as China becomes more developed, it should provide more value-added services, as opposed to concentrating on agricultural and manufacturing sectors.

As such, downstream specialty and value-added petrochemical producers can move to China, where big domestic markets lie, Peterson said.

Upstream chemical producers may find it more beneficial to move their operations to the Middle East due to the area’s strong feedstock advantage, he said.

“Feedstock availability and market access are the two main things that petrochemical owners look at when constructing a plant [in a specific region],” Peterson said, adding that other considerations include the country’s logistical strength and economies of scale.

Singapore has used such factors to attract major ethylene producers, he said. The nation was chosen despite the high operation and start-up costs as it boasts one of the best logistics support facilities in the region as well as economies of scale, Peterson said.

The APIC 2008 runs from 27-28 May and is hosted by the Singapore Chemical Industry Council.

ICIS and The Chemical Daily have produced an official 84-page special publication on Asian petrochemicals for the APIC event.
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By: Serene Cheong
+65 6780 4359

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