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South East Asia Leads the World Polymer Market

  • Friday, 12th November 2004
  • Reading time: about 5 minutes

A new report from AMI, the South East Asian market for thermoplastics is forecast to grow by over 6% in 2004.

These figures in a report by Applied Market Information Ltd. show demand in South East Asia to total nearly 50 million tonnes. This will make the region the clear leader in global terms, larger than the markets of Europe or North America.

The latest in AMI’s series of industry reports looks at developments in South and East Asia. The market is increasingly being driven by developments in China and whilst the growth there has fuelled export booms for the rest of the region in commodities, raw materials, machinery and components, the strength of China could ultimately undermine the plastics industry in the rest of South East Asia.

China accounts for nearly 65% of all polymer demand and approximately one-third of production (although this also illustrates the considerable shortfall in polymer supply in China). With the exception of Vietnam (which has been developing from a much lower base), it has consistently been the fastest growing market in the region for over a decade and growth continued unabated through both of the recessionary periods of 1998 and 2001. The dynamism of the Chinese economy has been largely immune to global influences.

According to AMI, 2004 is expected to be another strong year of growth for polymer demand in China. Government measures introduced during the year to dampen China’s runaway economic growth may have some limited impact on polymer demand. The chemical industry was not directly targeted but sectors such as construction and automotive were, markets that the plastics industry supply, which may lead to slightly slower growth. However, the first half of 2004 showed little sign of this. China’s huge dependency on imported polymer means that the country’s polymer markets have become integrated with international markets and follow global trends. Prices of domestically produced and imported materials are being driven up by high international prices for raw materials, as well as oil and naphtha. This is leading to some pain for processors, particularly smaller ones. However, overall growth for polymers in China in 2004 is expected to be close to the 9% achieved in 2003.

The success of China has tended to overshadow the situation in the rest of South East Asia, where the outlook is much less certain. If one removes China from the equation then the market is expected to show growth of only 2.5% for 2004. Demand growth in the rest of the region is being pegged back by the rise in polymer prices and the strength of the Chinese economy. It is not only processors in Europe or North America struggling to compete with Chinese production. The rest of South East Asia is also witnessing a growing trend for manufacturing to relocate to China and its markets susceptible to imports of cheaper finished goods from China.

The more developed economies of South Korea, Taiwan and Singapore, are seeing their markets mature and a tendency for plastics processing to move into China, Vietnam and other lower cost locations. Taiwan has had the added impact of environmental legislation banning the use of plastic carrier bags and disposable food containers, which has led to falling demand for some polymers. However, certain sectors of the processing industry have succeeded in moving up the value chain and often it is the low end, commodity work that has transferred to China. Countries such as Indonesia and the Philippines have been struggling to recover the ground lost during the economic crisis of 1998 and have seen a sharp decline in foreign direct investment. Both are expected to see falling demand in 2004, because of the effects of high polymer prices. Demand growth is expected to be stronger in Thailand and Malaysia for 2004, but here too rising imports of finished goods from China, high polymer costs and the transfer of manufacturing into China is dampening market growth.

AMI’s detailed report covers demand for all the major thermoplastics, including engineering resins, as well as providing overviews of the market by country. Commodity polymers account for just over 90% of demand, although demand for engineering resins has been growing more strongly so that their share of the overall thermoplastics market has been steadily increasing, up from 9% in 1998 and 8% in 1990.

Polyethylene markets have been performing strongly thanks to growing demand in most film applications which account for about three-quarters of LL/LDPE demand and 38% of HDPE. The strength of the building economy is also important for HDPE.

The Asian market is the main driver for the global PVC business. The surge in construction demand, particularly in China but also in Malaysia and Indonesia, has been significant, along with the proliferation of manufacturing for a wide range of general household and consumer products which use PVC. Factors particularly driving the building market in China include investments for the Beijing Olympics in 2008 and the Shanghai World Expo in 2010 together with increasing private home ownership.

Polystyrene markets are showing below average growth. Demand is weak in Taiwan, Korea, Thailand and Singapore. The main market driver for polystyrene has been increased demand for electronics and toys. However the manufacturing of these is increasingly being relocated to China, which is affecting polystyrene demand elsewhere in the region. In the case of Taiwan it has also been hit by the ban introduced at the beginning of 2003 on disposable plastic cups, tableware and fast food packaging.

The majority of the engineering plastic market is made up of ABS/SAN resins. Demand has remained buoyant despite high prices driven by home appliance and computer sectors in China. Demand for the other main engineering resins, polyamide, polycarbonate, PBT and acetal, has been growing very strongly largely because of developments in the electronics (for PBT and acetal) and optical media sector (for PC), but also increasingly by automotive applications (all types) especially in China.

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