ICIS Top 100 Chemical Companies: Top 10 Asia chemical leaders

17 September 2012 00:00  [Source: ICB]

Sinopec's remarkable rise in the petrochemicals business continued in 2011 as it jumped two places in the ICIS Top 100 ranking, compared with 2010, to finish second overall, behind BASF. This was the result of a 28.9% rise in chemical sales in local currency and a 34.9% increase when sales were measured in US dollars.

Asia mapThe steep rise in sales reflects the Chinese government's strategy of boosting petrochemicals self-sufficiency. New cracker and derivatives capacity was commissioned by Sinopec in 2011. Between 2000 and 2011, the company's total production in all chemicals rose from 2m tonnes to 10m tonnes - a 14% increase/year. Sinopec's operating profit also almost doubled in 2011 compared with 2010.

But markets had weakened by the fourth quarter of last year, and 2012 has been a disappointment. Demand growth in all the major synthetic resins is likely to be in the low single digits. Doubts are also growing over the health of the economy. GDP growth could be as low as 3%/year over the next few years as China goes from investment growth to ­domestic consumption-led growth.

If it fails to rebalance quickly, there is a risk of a major non-performing loans crisis as a result of continued investment in unneeded infrastructure and industrial capacity, warn some economists. This doesn't mean Sinopec will delay capacity expansions. The main role of the company, which is still 76% owned by the government, is to guarantee supply of raw materials to domestic downstream industries even if, at certain times, this means losing money. China is scheduled to increase its ethylene capacity from around 15m tonnes/year in 2011 to 27m tonnes/year by 2015, according to ICIS data. This puts Sinopec's overseas competitors, which answer to shareholders, in a difficult position if the worst fears over China's economy are realised.

South Korea's Honam Petrochemical, however, had a tremendous 2011 as a result of a 47.6% increase in sales. But South Korean companies in general are expected to struggle to achieve full-year 2012 financial targets because they are so dependent on China for exports. But in the case of Honam, its position has been strengthened by its 2010 acquisition of Malaysia's Titan Chemicals. This has given it better access to the booming Association of Southeast Asian Nations (ASEAN) markets, and an edge in exporting to China through the ASEAN-China Free Trade Area.

In 2011, Thailand's PTT Global Chemical, leapt into the top 30 of the ICIS ranking, thanks to its emergence from the merger of the former PTT Chemical and PTT Aromatics.

Asia top 10 2012

India's Reliance Industries, which saw 2011 petrochemicals sales jump by 28.2%, faces the challenge of effectively executing the biggest "off-gas" cracker project of all time at its Jamnagar complex in Gujarat. Due on stream in 2015, it could eventually produce 1.6m tonnes/year of ethylene as well as associated downstream capacities. It will be entirely fed by off-gases from Reliance's 1.24m tonne/year refinery at the same site. Reliance will spend $12bn on new petrochemicals capacity, which includes new paraxylene (PX), purified terephthalic acid (PTA) and polyester plants. Even if India's GDP growth slows dramatically, it should be able to absorb all of the new Reliance capacities. This time last year, people would have said the same thing about all the capacities added to serve China, but maybe not now.

By: John Richardson
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