Thailand’s Political Crisis Threatens ASEAN-China Growth

Business, China, Company Strategy, Economics, Polyolefins, Thailand

provmap

By John Richardson

THE political crisis in Thailand might take several more years to solve, if it can be solved at all, a chemicals industry executive told the blog on its recent trip to Bangkok.

We very much hope that he is wrong otherwise the victims of the crisis could be many people in Thailand itself, and across a wider swathe of Southeast Asia (SEA), who are denied new economic opportunities (there are, of course, many other implications of Thailand’s political crisis, which we will deal with in later posts).

“The [Thai] government has seen its flagship 2 trillion baht infrastructure investment bill hobbled by the political crisis,” wrote Financial Times in this 8 January article.

“While many across the political spectrum agree Thailand urgently needs better roads, railways and ports if it is to realise its vision of becoming a hub for SEA regional trade with China, the opposition Democrat party says the plan is ill-directed, lacks sufficient parliamentary oversight and risks fuelling corruption.”

Infrastructure investments include better road links with China. As the FT also wrote in a 10 December article, this process has already begun.

“Trucks are due to thunder from Wednesday over a vast new crossing on the Mekong River connected to highways either side that opens up north Thailand as a way station for goods headed between China and the 10-strong ASEAN group of nations mainly to the south and east,” said the newspaper.

“It is part of Bangkok’s broader regional ambition to become the dominant link for trade between China and ASEAN, where exports and imports surged more than six fold to $400bn last year, from $55bn in 2002, according to the Chinese data provider Wind Information.

“It is also meant to dovetail with the easing of regional trade barriers, as ASEAN heads for the creation of a planned economic community of more than 500m people by 2015.”

But the blog was told that a lot more work needs to be done on upgrading infrastructure, and in getting rid of red tape, so that there can be a more seamless flow of goods and services between China, Thailand, Myanmar, Vietnam, Laos and Cambodia.

If the work is carried out, chemicals and polymers from Thailand would flow more easily into the less-developed Chinese provinces which border this portion of Southeast Asia, such as Yunnan and Guangxi (see the above map).

Or resin might first move to, say, Myanmar where labour costs for plastic processing are lower than in Thailand. Finished and semi-finished plastics goods could then be transported to China, back to Thailand or to elsewhere in ASEAN.

China is aiming to raise its chemicals and polymers self-sufficiency overall, but in less-developed provinces such as Yunnan and Guangxi, it might make more sense to be heavily import-reliant.

The decision made by China could partly rest on whether it is cheaper to move polyethylene (PE) from Thailand or from other PE-producing regions of China to provinces such as Yunnan .

The same calculation might also eventually be carried out on the economics of shipping PE to China from planned investments in Vietnam versus shipments within China.

For example, Thailand’s Siam Cement Group has signed a joint venture agreement with partners, including Qatar Petroleum, on the $4.5bn (€3.38bn) project at Long Son Island in Vietnam.

The project would have a 1.4m tonne/year cracker with downstream facilities including a 400,000 tonne/year high-density PE (HDPE) unit, a 450,000 tonne/year polypropylene (PP) plant and a 400,000 tonne/year linear low-density PE (LLDPE) facility. Commissioning is due in mid-2016.

And across ASEAN as a whole, the overall objective is to further develop a a market that comprises some 500m people, as the 10 December FT article pointed out, into what could end up being a formidable regional trading bloc.

Many of these people have very low per capita incomes  and so the potential for “catch-up” chemicals and polymers demand growth is enormous, as it is in China.

PREVIOUS POST

China Slows Down

08/01/2014

By John Richardson CHINA’S economy appears to have slowed down. Evidence of th...

Learn more
NEXT POST

ExxonMobil Highlights US Growth Challenge

10/01/2014

By John Richardson WHEN somebody very senior in the petrochemicals industry make...

Learn more
More posts
China moves closer to Iran as tensions with the US build: Implications for petrochemicals
02/08/2020

By John Richardson Opinions and emotions and can shape how we interpret data, but, as we all know, o...

Read
China polyolefins market H1 review: so far so good, but beware of the risks ahead
30/07/2020

By John Richardson ALL looks fine in the polyolefins world. The Old Normal appears to have reasserte...

Read
Polyethylene market recovery could be threatened by slower China crude buying, weaker economic growth
28/07/2020

By John Richardson EVEN by China’s standards, where just about every number is eye-wateringly larg...

Read
Why the polypropylene industry must switch from volumes to value
26/07/2020

By John Richardson EVERYONE knows about the oversupply in the polyethylene (PE) market as it has bee...

Read
China consulate closure underlines long-term split with US, potential big shift in petchems trade flows
23/07/2020

The views in this blog post are, as always, my personal views and do not reflect the views of ICIS. ...

Read
China’s real GDP could have been negative in Q2: What this may mean for PP
22/07/2020

By John Richardson CHINA’S official GDP growth of 3.2% for Q2, which was announced last week, may ...

Read
Iran and China new deal could hasten Belt & Road Initiative petrochemicals self-sufficiency
19/07/2020

By John Richardson ONCE AGAIN, please don’t say I didn’t tell you. A proposed new investment and...

Read
China paraxylene imports head for bigger declines as excess industrial production appears to boost GDP
17/07/2020

By John Richardson SOME PEOPLE see the 9.9% year-on-year rise in China’s crude oil imports in Janu...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more