Asia as battleground for chemicals firms

Asia as battleground for chemicals firms

SINGAPORE (AFP): Asia is expected to be a major battleground of the world chemical industry after the region recovers from its present economic crisis, a top Japanese industry executive said here on Monday.

Shigenori Koda, chairman of Mitsui Chemicals Inc., told a regional chemicals conference that powerful western companies now undergoing mergers and restructuring were gearing up to expand their presence in Asia.

Asian petrochemical demand grew by 13.2 percent annually in the past five years, more than double the world average of 5.6 percent, and the Asian economic crisis since 1997 has caused "big damage" to the industry, Koda said.

But he added that "while Asia is expected to require from three to seven years to recover from such an economic confusion, in my view, Asia will get back on the path of high growth ..."

"Western chemical companies are increasingly amassing their powerful financial strength through mergers and other alliances, and are continuing with their investments in Asia, the only remaining growth market in the world," Koda said.

He said total Asian production capacity of ethylene, a key petrochemical product used in plastics and other downstream industries, reached 24 million tons in 1998, with U.S. and European firms accounting for only six percent.

He said this share could rise to 30 percent if western investments in new capacity went ahead.

"As a result, the Asian market is becoming an arena of the so- called mega-competition among the world's leading chemical players," the Mitsui Chemicals chairman said.

Mitsui Chemicals resulted from the October 1997 merger of Mitsui Petrochemical Industries Ltd. and Mitsui Toatsu Chemicals Inc. aimed at strengthening their global competitiveness.

With 41 production sites in 14 countries, it had a consolidated turnover of 960 billion yen in 1998, or US$8.5 billion at present exchange rates. Its Asian plants are located in China, Indonesia, South Korea, Singapore, Thailand and Vietnam.

At the chemicals industry conference, Philip Yeo, chairman of Singapore's investment-promoting Economic Development Board, stressed the importance of the chemical sector to the city-state, whose top industry, electronics, has fallen sharply.

He said strong growth in chemicals industries was one reason why Singapore's manufacturing sector declined by only 0.5 percent in 1998, a mild drop compared to the performance of other economies in the region.

Singapore's chemical sector -- including petroleum, petrochemicals and pharmaceuticals -- grew by 15.3 percent in 1998, contributing 21.5 percent of the manufacturing sector's value-added.

In 1999, the local chemical industry will see the launch of 11 new projects, with a total investment of S$1.9 billion (US$1.12 billion) by major western and Asian companies.

Singapore is building a new island, Jurong island, through reclamation and the amalgamation of seven islets. The complex will host plants built by some of the world chemical industry's biggest players and will cost some S$7 billion on completion.