Toilets, trade and towns; boom time for Asia's plastic makers | Reuters

From India's plan to plumb in over 100 million toilets in six years to China's ambitious new Silk Road network and the continued movement of millions of people into cities across Asia, plastic makers face years of strong demand.And, because they are closer to end-users and manufacturing hubs, Asian petrochemical makers are best placed to ride the boom. Their profits and share prices are rising and they're investing in new projects to expand their business. Chinese futures prices for PVC (polyvinyl chloride) DPVcv1, used in products from pipes to bank cards, have risen more than 80 percent this year.Petrochemicals, seen as a niche business in the oil industry, are used in 70 percent of manufactured goods - from mobile phones and yoga pants to cars and food packaging - and bring in valuable revenue for a sector otherwise battling over-supply.Annual demand for ethylene, the most-used compound among many petrochemical products, is expected to grow at over 10 percent in the coming decade, analysts say.In just one illustration of how demand is set to grow, the 'Clean India' programme, seeking to end open defecation by 2022, has been welcomed by the Indian Petrochemical Industry group as a 'boon for the plastics industry' - requiring building hundreds of millions of toilets, waste pipes and water supply systems to bring clean sanitation to more than 700 million people.'There is tremendous potential for petrochemical demand to go up because per capita consumption is so low.

Reuters November 16, 2016 05:00:10 IST
Toilets, trade and towns; boom time for Asia's plastic makers
| Reuters

Toilets trade and towns boom time for Asias plastic makers
 Reuters

From India's plan to plumb in over 100 million toilets in six years to China's ambitious new Silk Road network and the continued movement of millions of people into cities across Asia, plastic makers face years of strong demand.And, because they are closer to end-users and manufacturing hubs, Asian petrochemical makers are best placed to ride the boom. Their profits and share prices are rising and they're investing in new projects to expand their business. Chinese futures prices for PVC (polyvinyl chloride) DPVcv1, used in products from pipes to bank cards, have risen more than 80 percent this year.Petrochemicals, seen as a niche business in the oil industry, are used in 70 percent of manufactured goods - from mobile phones and yoga pants to cars and food packaging - and bring in valuable revenue for a sector otherwise battling over-supply.Annual demand for ethylene, the most-used compound among many petrochemical products, is expected to grow at over 10 percent in the coming decade, analysts say.In just one illustration of how demand is set to grow, the "Clean India" programme, seeking to end open defecation by 2022, has been welcomed by the Indian Petrochemical Industry group as a "boon for the plastics industry" - requiring building hundreds of millions of toilets, waste pipes and water supply systems to bring clean sanitation to more than 700 million people."There is tremendous potential for petrochemical demand to go up because per capita consumption is so low. There is a plastic usage in every utility," said B. Ashok, chairman of Indian Oil Corp (IOC.NS), which has a petrochemical plant at its refinery in Panipat, to the north of Delhi."Demand is strong not only for toilets. India is short of domestic PVC supplies and has been sourcing from countries including South Korea, so Korean export volumes are growing," said Hwang Kyu-won, analyst at Yuanta Securities in Seoul."LION'S SHARE"

China's "One Belt, One Road" project - to build a vast rail, road, shipping and factory network between China, central Asia, Africa and Europe - will also require millions of tonnes of plastic materials, noted Luna Kim, principal consultant at Chemical Market Research Inc.This, together with the urbanisation of tens of millions of people across Asia each year, means the region will have as many as 650 million new petrochemical customers within two decades, predicts research firm IHS Markit.Mark Eramo, vice president for global chemical business development at IHS Markit, said the Asia Pacific region will "have the lion's share of the total investments" in petrochemicals until 2025, adding another 100 million tonnes of basic chemical production, including ethylene."Ethylene and its related product supply will remain tight over the next 12 months," Japanese bank Nomura said in an investor note.

The demand boom is showing across markets, with IHS Markit expecting overall 2016 Asian ethylene margins of $600 per tonne, up from below $400 last year.In Thailand, PTT (PTT.BK), Thai Oil (TOP.BK) and Siam Cement (SCC.BK) all reported strong profits in the last month, citing the performance of their petrochemical divisions.ADVANTAGE ASIA
To be sure, plastic makers from the United States, Europe and the Middle East, such as BASF (BASFn.DE), Exxon Mobil (XOM.N), Total (TOTF.PA) and Dow Chemical (DOW.N), also hope to profit from Asia's soaring demand, but those closer to that demand should benefit most from lower transit costs and cheaper feedstock prices.

"Asian petrochemical makers can be winners over U.S. petrochemical makers," said Jae-sung Yoon, analyst at Hana Financial Investment in South Korea.Asia's leading refiner Sinopec Corp (0386.HK) has announced a joint venture with Taiwan's Dynamic Ever Investments to build a petrochemical complex in China's southeastern Fujian province, while Korea Petrochemical Industry Corp (006650.KS) and Malaysia-based Lotte Chemical Titan (011170.KS) plan to expand next year. In the Philippines, JG Summit (JGS.PS) has also said it plans to expand.Malaysia's state-owned energy firm Petronas [PETRA.UL] has a $27 billion refining and petrochemical complex due to come on stream in 2019.Asian petrochemical makers are also at an advantage in that they largely use the fossil fuel naphtha as a feedstock, while the main feedstock in the United States is natural gas."By using natural gas as a feedstock, U.S. ethane crackers can only obtain ethylene. However, Asian naphtha crackers can also produce other byproducts like butadiene and propylene," said Yoon at Hana Financial.This feedstock flexibility has helped Lotte Chemical, Formosa Petrochemical (6505.TW) and India's Finolex Industries (FINX.NS) outperform share price gains at manufacturers based in other regions. (Reporting by Jane Chung and Nataly Park in SEOUL, Florence Tan in SINGAPORE, Nidhi Verma in NEW DELHI, and Aizhu Chen in BEIJING; Writing by Henning Gloystein; Editing by Richard Pullin and Ian Geoghegan)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

also read

Struggling Indian savers threaten Modi's growth ambition
| Reuters
Fwire

Struggling Indian savers threaten Modi's growth ambition | Reuters

By Rajesh Kumar Singh and Suvashree Choudhury | NEW DELHI/MUMBAI NEW DELHI/MUMBAI For India's dream of taking the baton of global growth from China, its savings rate is flashing a warning sign.Gross national savings as a percent of the South Asian nation's gross domestic product will slip this year to 30.2 percent, the lowest since 2003, and fall further over the next two years, the International Monetary Fund forecasts.Since companies use domestic savings to fund their capital spending, the fall would increase their vulnerability to external risks - such as uncertainty over the U.S. presidential election or the prospect of monetary tightening there - that could staunch the flow of cheap investment dollars to emerging markets such as India. It's a worry for Prime Minister Narendra Modi who aspires to achieve economic growth rates of 8-9 percent - much higher than the current 7.1 percent - not only to replicate China's growth miracle but also to create jobs for the one million people who join India's workforce every month.Nearly two-thirds of India's 1.3 billion people are under 35 years old

Samsung Electronics considers split as investor pressure builds
| Reuters
Fwire

Samsung Electronics considers split as investor pressure builds | Reuters

By Se Young Lee | SEOUL SEOUL Tech giant Samsung Electronics Co Ltd (005930.KS), under pressure from shareholders to improve investor returns, said on Tuesday it will consider creating a holding company in what would be the biggest shake-up in its 47-year history.The move and a plan to raise dividends come after U.S. hedge fund Elliott Management in October called for the South Korean firm to split itself into a holding vehicle and an operating company.However, the world's top maker of smartphones, memory chips and televisions, said it was "absolutely neutral" about whether to proceed and provided little detail on the potential restructuring, underwhelming investors."The review does not indicate the management or the board's intention one way or another," the company said in a statement, adding it had hired external advisers for a review expected to take at least six months.Samsung's statement keeps the door open for Elliott to continue its pressure on the company, which includes the hedge fund's ability to nominate board directors at the next annual meeting.Elliott, through its holding company affiliates, Blake Capital and Potter Capital, called Samsung's plan a "constructive initial step." But the $27 billion hedge fund also signalled it wanted more."We anticipate more meaningful changes following the company's corporate structure review," the Elliott affiliates said in a statement on Tuesday.The shareholder pressure on Samsung comes as the company juggles a leadership succession and a major blow to its brand after issuing an unprecedented recall of at least 2.5 million Galaxy Note 7 smartphones in September.Shares in Samsung, worth $224 billion combined, finished unchanged on the day at 1.677 million won ($1,434) each.

U.S., Iran clash over Tehran's testing of limit in nuclear deal
| Reuters
World

U.S., Iran clash over Tehran's testing of limit in nuclear deal | Reuters

By Francois Murphy | VIENNA VIENNA The United States and Iran on Thursday clashed openly at the U.N. atomic watchdog for the first time since they signed a landmark nuclear deal last year, differing over Tehran's repeated testing of one of the deal's less strictly defined limits.The International Atomic Energy Agency (IAEA), which is policing the deal, said Iran's overstepping of the limit on its stock of a sensitive material for the second time this year risked undermining countries' support for the agreement.The victory of Donald Trump - a vocal critic of the deal - in the U.S.