ICIS Top 100 Analysis: Economic conditions challenge Asian companies

Asian companies in 2014 took steps such as switching to lighter feedstocks to boost profitability, while maintaining investment in capacity expansions.

It was a difficult year for Asian chemical companies, with the majority affected by weak economic conditions and falling prices of feedstocks and products.

China’s Sinopec held on to its position as Asia’s largest and the world’s second largest petrochemical company despite challenging conditions in its home market.

The state-owned refining and petrochemicals major benefited from growth in consumption of ethylene derivatives in the country, but its results were hit by declines in the performance of rubbers, fibre intermediates and synthetic fibres businesses. Sales volume of synthetic rubbers fell by 2.19%, while sales of intermediates and fibres declined by 9.15% and 5.53% respectively

Faced with falling product prices, Sinopec took many steps to maintain profitability. This included increasing the use of lighter feedstocks, adjusting its product mix and increased efforts in R&D. Sales of new polyolefin products and specialty materials accounted for 54.7% of total sales, and high-value-added rubber accounted for 17.4%, estimated Sinopec.

Two Asian companies moved up rapidly on the global rankings chart: PTT Global was up five positions to number 17, while SK Global climbed nine positions to number 27. Both companies posted increases of only around 4% in revenues, while operating profits declined on weak market conditions, especially in the aromatics business, which is plagued by global oversupply.

PTT remains confident about the future, however, and is focusing on the completion of a new phenol unit in Thailand in 2015, as well as the debottlenecking of an aromatics unit.

It is expected to take a final investment decision this year on a 1.5m tonne/year joint-venture cracker complex with Pertamina in Indonesia, which should help it boost its market share in southeast Asia.

India’s Reliance Industries held on to its global ranking despite a fall in revenues and profits in its petrochemicals business. The steep decline in product prices during the second half of 2014 affected the company’s performance.

However, the start-up of new capacities and robust growth of the Indian economy is expected to help Reliance better its results in the coming years.

Among the Japanese companies, Sumitomo Chemical also maintained its position on the rankings chart despite lower sales. The company was, however, helped by a weaker yen, which enabled it to boost exports.

Mitsui Chemical, however, slipped on the ranking chart last year despite strong growth in profits. The company continues to restructure operations of its basic chemicals division by closing older and smaller plants in Japan.

For the future, the company is banking on its overseas investments to deliver competitiveness and profitability. This includes a phenol joint venture with Sinopec in China and an integrated petrochemicals joint venture in Vietnam. It has also recently formed a joint venture for the polyurethanes business with South Korea’s SKC.

It is also focusing on a new 300,000 tonnes/year Evolue polyethylene plant in Singapore to tap the fast growing packaging business in Asia.