EDB expects to bring in specialty chemical projects from emerging markets
Jamie Lee, Business Times 1 Sep 08;
(SINGAPORE) The Economic Development Board (EDB) is expecting more specialty chemical players in the form of national owned companies (NOCs) and others from emerging markets such as China, India and the Middle East to set up shop here soon, as it steps up efforts to attract more downstream players.
And while EDB sees investments in the sector declining from last year's $8.6 billion in fixed asset investments as a result of the cyclical slowdown, the industry - which topped the manufacturing cluster with $81.7 billion in output in 2007 - will still remain a significant contributor this year.
'The last two years were exceptional because of the cracker investments. I think this year we'll be expecting more of the downstream,' EDB deputy director of energy, chemicals and engineering services Loh Boon Chye told BT.
'For the chemical industry, we talk about whether there is a way we can engage the future 'seven sisters' of the world,' he said, referring to NOCs that are building up their capacities to rival conventional giants such as ExxonMobil and Shell.
'We are now also engaging them, talking to them to see how we can strike a partnership,' he added.
The deals in the pipeline will include a mix of new players and companies that have 'a small presence in Singapore', said Mr Loh. He declined to say how much the upcoming deals would be worth, but noted that Tamil Nadu Petroproducts' US$110 million petrochemical plant - the first Indian petrochemical project on Jurong Island - is a relatively large deal.
'Margins are being squeezed because raw material prices are high; there's uncertainty that they cannot pass on the costs easily. But because everybody knows that it's cyclical, a lot of people will time their investments such that when they start up the facility, the industry will be heading towards an upturn,' he said, adding that the downstream projects are expected to begin construction in 2011 and will take about 18 months to be completed.
Other traditional partners are looking at further investments. Japan's Mitsui Chemicals - which has pumped in around US$700 million in several plants on Jurong Island - is mulling the set-up of another phenol plant here, while Asahi Kasei Corporation said it has considered building a synthetic rubber facility. Mr Loh said other companies are still doing feasibility studies but are 'close to making a decision' by the end of the year.
He added that he was 'quite confident' of the sector maintaining the compounded annual growth rate of over 20 per cent that it has been registering in the last eight years. Singapore's ethylene capacity - a form of production measurement - is about 2 million tonnes per annum and is expected to double by 2011 when the Shell and ExxonMobil's crackers are completed.
Despite rising costs, Mr Loh said Singapore remains cost-competitive as it has a critical mass of petrochemical industries and brings its logistics strengths to the table.
'In this industry, big is beautiful. If you have big facilities, it means you have the economies of scale, so your fixed costs can be spread,' he said.
Mr Loh added that having a strong talent pool has become a priority for EDB as it tries to dispel notions that working in the chemical industry is restricted to factory production. Besides hosting more than 700 tertiary students to the once-restricted Jurong Island last Saturday, it is looking to promote scholarships and internships offered by global chemical firms to woo more students.
He also said that while education opportunities are enough for now, more chemical industry-related courses at the undergraduate and masters level are likely to be needed in the future to match rising demand for skilled workers in the industry.
