Market and product

The future of the Thai petrochemicals industry was thrown into doubt after a court issued an order in September 2009 to suspend 18 of Siam Cement's 20 new projects, worth a total of US$1.74bn, at the Map Ta Phut industrial estate. The estate currently hosts 76 industrial plants, but work on new facilities was stopped by the courts. The Central Administrative Court ruled that the new plants did not comply with environmental and health regulations contained in Thailand's 2007 constitution, which requires environmental impact assessment (EIA) approval and health impact assessment (HIA) approval for new industrial projects that could be harmful to the local community. In December 2009, the government said it would back an appeal against some of the stoppages and the courts indicated in the same month that 11 projects would go ahead.

In 2009, Thailand had olefins production capacities of 2.53mn tonnes per annum (tpa) ethylene, 1.26mn tpa propylene and 295,000tpa butadiene. Aromatics and intermediates included 1.87mn tpa benzene, 220,000tpa ethylbenzene, 785,000tpa ethylene dichloride, 545,000tpa styrene, 900,000tpa vinyl chloride monomer and 3.06mn tpa xylenes. Resins capacities include 1.28mn tpa HDPE, 260,000tpa LDPE, 420,000tpa LLDPE, 860,000tpa PET, 1.58mn tpa PP, 405,000tpa PS and 960,000tpa PVC. We estimate that petrochemicals consumption and production volumes for olefins and polyolefins declined by 15% in 2009, despite the petrochemicals industry being one of the main beneficiaries of the government's injection of THB1.52trn (US$44bn) as part of a three-year investment programme in infrastructural developments. The industry passed the worst of the downturn in Q209, with the economic revival gathering pace in H209. We think that this momentum can be sustained into 2010. Underpinning this view is a slightly less bearish outlook for the global economy in 2010 - of 2.5% global expansion - which should provide some support to Thailand's export-oriented petrochemicals industries. Added to this is a 3.0% growth in domestic demand.

Mab Ta Phut will remain the focus of petrochemicals developments, although there have been delays to some projects. The start-up of PTT Chemical's new 900,000tpa ethane cracker at Map Ta Phut was delayed from Q409 to Q110. The shutdown of the existing unit was planned to coincide with the trial runs of the new cracker in order to allocate the ethane feedstock from the old cracker to the new one. This pushed back PTT Chemical's month-long maintenance at its 460,000tpa ethane cracker by about three months. It also pushed the opening of associated PE plants to 2010.

The Thai petrochemicals industry undergoing a process of consolidation. In January 2010, PTT announced that it intends to complete the merger of its four petrochemical and refining units by 2012. The plan could mean that its three listed subsidiaries - PTT Aromatics and Refining (PTTAR), PTT Chemical (PTTCH) and IRPC - which are all located at Rayong, will be merged as soon as Q110. Chon Buri-based Thai Oil will be excluded from the first phase of the merger. Meanwhile, in December 2009, Solvay launched a tender offer to acquire the nearly 50% it does not own in Thailand's PVC producer Vinythai for THB3.64bn (US$110mn), having passed the 50% threshold that will enable it to take over the company.

In January 2010, Indorama Ventures, the parent of Indorama Polymers, launched an IPO raising US$123mn, which was well down on the US$347mn it had planned due to the deterioration of the global equity environment. Part of the aim with the listing is to combine one of Indorama Ventures' already listed subsidiaries, Indorama Polymers, with the parent company to improve the integration between the two operations and make the group even more efficient in terms of reducing costs and enhancing margins. It will also provide better access to the stock for international investors. Following the completion of a share swap between Indorama Polymers and Indorama Ventures in February 2010, Indorama Polymer was to be delisted.

In our Asia Petrochemicals Business Environment Rankings matrix, Thailand is sixth, with 67.7 points, up 2.0 points since Q409 due to an improvement in its petrochemicals market score as new plants come online in 2010. It is 7.3 points behind Singapore and 4.3 points ahead of Malaysia. Thailand is set to climb up the rankings, with its ethylene, PE and PP capacities forecast to rise by 80%, 80% and 52% respectively in 2008-2014.

(Source: http://www.companiesandmarkets.com)