Price and market trends: Asia petchems require overhaul

17 May 2013 09:55  [Source: ICB]

The US shale gas revolution may force changes among Asia's petrochemical producers, say senior industry officials

Asia's petrochemical players will need to further transform themselves to stay competitive amid the development of low-cost shale gas in North America that will change how the industry works in the near future, senior industry officials said at the Asia Petrochemical Industry Conference in Taipei, Taiwan.

 Structural change is coming to Asia's petrochemical sector

"The shale gas revolution initiated in the US, a major contemporary event, is now reshaping not only the energy industry, but global economy and geopolitics as well," said Yoshimitsu Kobayashi, chairman of the Japanese Petrochemical Industry Association.

The US chemical industry is being renewed by the shale gas revolution, enjoying major cost competitiveness in both energy and raw materials, Kobayashi said.

"Affordable natural gas and ethane is giving US manufacturers an advantage over foreign competitors that rely on oil-based raw materials instead of natural gas," said Yusa Hassan, president of the Malaysia Petrochemicals Association.

This could cause a "great deal of discomfort" to the Asian petrochemical industry, which is highly dependent on naphtha as a feedstock, according to Kobayashi.

However, the reinvigorated chemical industry in the US should be considered as an opportunity for Asian players and not as a constraint, he said.

The Asian chemical industry should "overhaul and transform ourselves [and] the battleground should be in the C4 or heavier cut [product lines] and aromatics-based chemicals", he added.

"The supply of low-priced products that are based on coal and shale gas will become a threat to the existing petrochemical industry and will bring a significant change in its structure," said Han-Hong Ban, chairman of the Korea Petrochemical Industry Association (KPIA).

"It is essential for us to respond to such changes in the business environment and to agree that a sustained partnership among [APIC] member countries is needed," Ban said, referring to Japan, India, Singapore, Malaysia, South Korea, Taiwan and Thailand.

The search for more sustainable feedstocks will "continue for a while", said Supachai Watanangura, honorary chairman, Petrochemical Industry Club, the Federation of Thai Industries.

Apart from shale gas, other sources of feedstock including coal-to-olefins and bio-based raw materials could be exploited," he said.

However, there is still great uncertainty over the usage of these feedstocks as a mainstay in the industry, Watanangura noted.

"Clean, yet immature technologies of unconventional, renewable feedstock either call for staggering investments or are not yet accessible," he said.

"What's more, such technologies have unclear environmental impacts - including emissions and water resources. If we choose this route, we would need extreme patience and investment."

By: Nurluqman Suratman

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