13/3/18 The Overview of Taiwanese Petrochem...

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The Overview of Taiwanese Petrochemical Industry in 2011~2012

資訊類別： ITIS評析
模 組 別： ITIS塑化產業
作 者： 范振誠
出版日期： 2012/07/13

1. Industry Overview

The petrochemical industry is one of the fundamental industries for a country’s

development, and the development of the industry itself brings broad benefits to national
economic development. In addition to the downstream products of the petrochemical
industry which are widely used in people’s everyday lives, about 60~70% of hardware for
industries, including the information, electronics and automotive industries as well as precision
products, come from the petrochemical industry. Examples of such products include
components, hard cases, tires and chemicals. Therefore the petrochemical industry is not
only a nation’s livelihood industry, but also an indispensable fundamental industry for the
development of high-tech industries.

In this study, the scope of the petrochemical industry covers the basic raw materials of
the upstream industry, such as ethylene, propylene, butadiene, benzene, toluene and xylene.
These basic raw materials then go through polymerization, esterification, alkylation and other
chemical reactions to produce the common "plastic materials", "rubber materials", "synthetic
fiber materials" and "other intermediate materials" for the midstream industry (see Figure 1).

Figure 1 Structure of Taiwanese Petrochemical Industry

2. Annual Summary of Taiwanese Petrochemical Industry in 2011

2.1 Market Overview

Taiwan’s petrochemical output reached a record-breaking USD 65.2 billion in Year 2011
(See Figure 2). The expansion of Taiwan’s petrochemical market in the second half of 2010
lasted throughout Q1 2011, with petrochemical output totaling USD 34.9 billion in the first
half of 2011, thanks to the continuous increases in demand and the price of petrochemical
products. An imbalance between petrochemical demand and supply in the second half of
2011 (due to the deflation in China, debt crises in the U.S. and Europe, weakened
petrochemical demand, and occupational accidents in Taiwan) reduced the output to USD
30.2 billion, a 13.2% decrease compared to the first half.

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Figure 2 Total output of Taiwanese petrochemical industry from 2008 to 2012

2.2 The Global competitiveness of Taiwanese petrochemical products

Generally speaking, some products of the Taiwanese petrochemical industry remain well-
performing in a global market dominated by multinational conglomerates, as shown in Figure
1:

Figure 1Taiwan’s position in global ranking of petrochemical competitiveness

Taiwan’s position in Total production (in thousand Global market

Year
global ranking metric tons) share
ABS 2008 2 1, 130 17.0%
2009 2 1, 250 19.1%
2010 2 1, 365 18.7%
TPE 2008 2 301 17.7%
2009 3 242 13.9%
2010 3 278 14.9%
PTA 2008 3 4, 100 11.6%
2009 3 4, 410 11.3%
2010 3 5, 160 13.3%
Source: IEK/ITRI (2012/07)

3. Important Issues in the Petrochemical Industry in 2011

3.1 The aborted investment project of Kuo Kuang Petrochemical Technology
Company

3.1.1. About the Kuo Kuang petrochemical investment project

Before 2005, Kuo Kuang Petrochemical Technology Co. (Kuo Kuang) had proposed to
invest in a petrochemical plant in an industrial zone off the coast of Yunlin County. After being
approved by MOEA as an initiative that meets the country’s industrial development needs,
Kuo Kuang’s investment project was submitted to the Executive Yuan, which approved and
listed it in 2008 as a major national project.

The 2-stage investment plan costs an estimated NT$ 900 billion, with the first stage
including a refinery that produces 300,000 barrels of crude oil per day, a naphtha cracker
that produces 1,200 thousand metric tons of ethylene per annum, an aromatic hydrocarbons
center that produces 1,500 thousand metric tons per annum, 23 mid- and lower-stream
petrochemical plants, 11 units of cogeneration equipment, and industrial harbor/wharf
facilities.

3.1.2. The Taiwan government called off Kuo Kuang’s petrochemical project

On Apr. 22, 2011, the central government took the initiative to call off Kuo Kuang’s
petrochemical project, citing environmental concerns and negative public response. At a
board meeting in the morning of April 27, Kuo Kuang announced two decisions: firstly, the

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environmental impact assessment (EIA) of the company’s investment in Dacheng Township,

Changhua County shall be canceled; secondly, the petrochemical project is put on hold,
despite an ongoing effort to seek investment opportunities worldwide. The Kuo Kuang
project had been through 24 EIA sessions in a span longer than five years, but to no avail.

3.1.3. The Consequences

1. Kuo Kuang is hardly likely to maintain its current investment amount in Taiwan.
2. The aborted Kuo Kuang project will result in severe economic loss.
3. The aborted Kuo Kuang plan, which includes several high value-added
petrochemical products, would hamper Taiwan’s attempt to develop a high
value-added petrochemical Industry.

3.2 Taiwan vows to build a high value-added petrochemical industry

In recent years, Taiwanese petrochemical industry has reached a bottleneck as

investment projects are hampered by such global issues as the rapid expansion of emerging
economies and price wars, besides domestic problems including environmentalist protests. As
Europe, Japan and many other countries are attaching greater emphasis to the Research and
Development (R&D) of high value-added petrochemical products, it is imperative that Taiwan
develops a high value-added petrochemical industry to not only alleviate the threat from
emerging regions’ production capacity expansions, but also deliver high value-added
derivatives as raw materials to ensure the industrial upgrading of lower-stream firms.

To help local petrochemical firms achieve a breakthrough, in June 2011 the Taiwan
authorities launched a “Strategic Planning Meeting for Taiwan’s High Value-Added
Petrochemical Industry” and began to devise relevant development strategies. Established at
the same time were a dedicated office to promote the development of a high value-added
industry, as well as centers for the pilot production and accreditation of novel materials. Not
only did the government decide that a high value-added petrochemical industry is the trend
to embrace, it also announced the following goals for each phase of Taiwan’s attempt to
develop a high value-added petrochemical industry:

1. R&D efforts will account for more than 1% of total cost of petrochemical
industry by 2016.
2. R&D efforts will account for more than 2% of total cost of petrochemical
industry by 2020.
3. The value-added ratio of Taiwan’s petrochemical industry will have exceeded
20% by 2020.

4. Development Trends for the Petrochemical Industry in 2012

Despite its impressive results in the first half of 2011, the global petrochemical industry
suffered a severe downturn starting in the second half because of sluggish growth in the U.S.
economy, the expanded production capacities in emerging regions such as the Middle East
and China, and the European Sovereign Debt Crisis.

In 2012, the Taiwanese petrochemical industry is expected to be affected considerably in

terms of sales results and demand by emerging petrochemical-producing countries and
financial crises, among other global issues.

4.1 The relatively higher probability of a neutral or negative outlook for Taiwan’s
petrochemical industry

In 2011, Taiwan’s petrochemical industry took a severe downturn due to sluggish growth
in the U.S., the European Sovereign Debt Crisis and China’s inflation. While 50% of the
experts surveyed believe things will stay pretty much the same in 2012 compared to 2011,
45% predicted an industry downturn (See Figure 3).

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Figure 3 13 The 2012 outlook for Taiwan’s petrochemical industry

4.2 Excess petrochemical capacity affects industrial development

According to a survey conducted by the Industrial Economics & Knowledge (IEK) Center
of Industrial Technology Research Institute of Taiwan (ITRI), the expansion in petrochemical
production capacity in China and the Middle East amid economic uncertainties spark a surge
in the supply of petrochemical products, although the demand is subject to change. Most of
the experts surveyed, therefore, predicted a surplus of petrochemical products in 2012: half
of them consider the surplus highly probable; 30%, slightly probable; 10%, extremely
probable; 10%, hardly probable (See Figure 4).

Figure 4 Probability of petrochemical surplus in 2012

5. Conclusions

5.1 Petrochemical Industry kept declining in 2011 despite an impressive start

Taiwan’s petrochemical output totaled USD 34.9 billion in the first half of 2011 but
decreased by 13.2% to USD 30.2 billion in the second half due to an imbalance between
petrochemical demand and supply stemming from the deflation in China, debt crises in the
U.S. and Europe, weakened petrochemical demand, and occupational accidents in Taiwan.

5.2 The aborted Kuo Kuang petrochemical project changed the goals of the Taiwan

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petrochemical industry

Following the Formosa Plastics Group's Mailiao-based 6th Naphtha Craker Plant, Kuo
Kuang proposed to invest in another large-scale petrochemical manufacturing base in Taiwan.
The Taiwan government’s April 2011 announcement of aborting the Kuo Kuang investment
project indirectly suggested that the company is unlikely to maintain its current investment
amount in Taiwan, and also that Taiwan’s petrochemical industry must transform the
business model from a mass-production one.

5.3 Taiwan vows to build a high value-added petrochemical industry

To help local petrochemical firms solve the current dilemmas, the Taiwan authorities
launched a series of meetings for the strategic planning of a high value-added petrochemical
industry, followed by a June 2011 announcement that set the goal of developing such a high
value-added industry with a 30% minimum value-added ratio in each petrochemical product.
The other government-determined goals for different phases of Taiwan’s attempt to develop
a high value-added petrochemical industry are: firstly, R&D efforts will have accounted for
more than 1% of total cost of petrochemical industry by 2016; secondly, R&D efforts will
have accounted for more than 2% of total cost of petrochemical industry by 2020; thirdly,
the value-added ratio of Taiwan’s petrochemical industry will have exceeded 20% by 2020.

5.4 Excess capacity may affect the outlook of the global petrochemical industry

According to a survey conducted by ITRI’s IEK Center, the expanded production

capacities in China and the Middle East are the first and third most important factors affecting
the 2012 outlook for global petrochemical industry, respectively.

With the increasing supply and uncertain demand in global petrochemical market, 90% of
the experts surveyed predicted a surplus in annual 2012 petrochemical production.

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