FocusChina offers tough competition to S East Asian BOPP makers

17 February 2010 06:37  [Source: ICIS news]

By John Richardson

SINGAPORE (ICIS news)-Southeast Asian (SEA) biaxially oriented polypropylene (BOPP) film producers are confronting increased competition in their home markets from Chinese exporters as a result of a new free-trade agreement, industry sources said on Wednesday.

“Some of the BOPP film players I met during a recent trip to Indonesia said they were very worried about the threat from China due to their weaker economies of scale,” a polyolefin industry source said.

End-use applications for BOPP film include flexible packaging, pressure-sensitive tape, stationery and cable and insulation.

Import duties on BOPP film exported from China to the six founding members of the Association of Southeast Asian Nations (ASEAN) fell to zero on 1 January this year. These six founding members are Indonesia, Thailand, Malaysia, Singapore, the Philippines and Brunei.

This was the result of the ASEAN-China Free Trade Agreement (ACTFA) coming into effect.

“China has been buying 15 state-of-the-art BOPP film lines each year over the past few years and considerable further capacity is due on-stream in 2010 and 2011,” said Stephen Moore, Singapore-based plastics processing consultant with Intercedent, a management consultancy providing market research and strategic planning.

Nameplate capacity totalled 3.2m tonne/year in 2009 versus domestic demand of only 2.2m tonne/year, said Moore.

“These brand-new lines tend to be run very hard – at or close to 100% - for reasons of economics, resulting in last year’s actual surplus being significant.

“Indonesia, with a total capacity of 220,000 tonne/year, has older and therefore non-world-scale lines.

“The Indonesian market is also in oversupply, meaning the buyers already had the upper hand, even before ACTFA.”

The local market would see more overcapacity when a new BOPP line comes on stream at the end of 2010, boosting capacity by more than 30,000 tonne/year, he added.

Thailand’s supply and demand balance was “pretty good”, although its 150,000 tonne/year capacity was not all state-of-the-art, said Moore.

Malaysia had focused on stretch linear-low density polyethylene (LLDPE) film, where the Chinese local market  was in deficit – therefore, it’s plastics processing sector didn’t face a big threat from ACFTA, he added.

LLDPE stretch films applications are similar to those of BOPP film, but tend to be lower down the value chain.

Singapore and Brunei had very small plastic processing sectors and so the zero-tariff regime didn’t represent a threat, said Moore.

“The Philippine processing sector is also going to lose out under the agreement, I think. It lacks the scale of China to really complete,” the industry source added.

The introduction of ACTFA has led to Indonesian claims that as many as 7.5m manufacturing jobs across all industries, from a total of 30m, could be lost.

But renegotiating the deal would be highly complex, expensive and is therefore very unlikely, Ed Sim, a leading trade lawyer earlier told ICIS news.

This left antidumping and other trade-protection duties as the only viable route open to ASEAN industries that stand to lose out under ACTFA, added Sim, who is partner in the Singapore branch of international law firm, Appleton Luff.

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By: John Richardson
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