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Resin Industry (PHILIPPINES)

The Philippines' producer of PE (LDPE, HDPE) resins, JG Summit


Petrochemical, is a joint venture between Marubeni and local conglomerate Gokongwei.
The venture began producing PE just this year after finishing construction in the second
half of last year of a 200,000-tpy swing L-LDPE/HDPE facility.

Ironically, the Philippines has no enough ethylene plants upstream and relies on
imports for all supplies of the raw material. JG Summit intends to rectify this situation by
bringing onstream a 350,000- tpy ethylene plant in 2001, but before that plans to
expand its LDPE capacity by 100,000 tpy. Rival NPC Alliance Corp. (Bataan
Polyethylene) broke ground last year for a 250,000-tpy swing LDPE/HDPE facility
targeted for completion in the latter half of 1999. Also PEMA Plastic Mfg. Corp. is a
manufacturer of LDPE, HDPE resins. This company, funded by Sumitomo & Co. and
others, also finished construction of an upstream ethylene plant in 2001.

The Philippine plastic industry is relatively young which grew only in mid-1960’s
with the arrival of technology for injection, extrusion, and blow molding. Plastic pipe
production began in 1970s with increased demand for the product as inputs for the
government’s waterworks projects. Two companies set up the first two plants in the
Philippines, these are Mabuhay Vinyl Corporation , put up the first synthetic
thermoplastic and resin plant in Mindanao. Vinyl Consortium established a plant with an
annual capacity of 18,000 metric tons for the production of Vinyl Chloride Monomer
(VCM). Both of these companies supplied inputs to other manufacturers for the
manufacture of plastic pipes, footwear, packaging and calendaring items.
Subsectors of the Plastic Industry /Channel of Distribution :

Upstream Industries

Extraction of the following elements from petroleum


ethylene and propylene

Midstream Industries

Processing of ethylene and propylene to yield


synthetic resins, polyvinyl chloride (PVC), polystyrene
(PS), polypropylene (PP), polyethylene (PE)

Downstream industries

Processing of synthetic resins to make finished and


semifinished plastic products

Industrial and Consumer markets

Consumption of the Plastic Resins Industry

Resins Percent
Polymer
Imported
Polyethylene 50%
Polypropylene 25%
Polyvinylchloride 20%
Polystyrene 5%

Only polyethylene and polypropylene are produced locally as of the year 2008.
The remaining 50% of polyethylene inputs are imported. Meanwhile, the main products
for the plastic industry includes Polybags (woven sacks, regular film bags, PVC pipes,
Industrial crates, bottles and housewares). Hence, the main markets of plastics include
the manufacturers and producers of sugar and rice, millers and supermarkets,
contractors, hardwares, restaurants, fish dealers, bakeries, soft drink manufactures,
cosmetics, health care, food and pharmaceutical industries and consumers, wholesalers
and retailers.

The demand determinants vary depending on the market. Industrial clients


mainly look for quality rather than price. For the mass consumer market, price is a
critical factor.

Philippine Trade Statistics of Plastic Resins

Philippine Top Imports of Plastic Resins Corresponding Top 5 Countries


Value – Millions of US$
H.S. Code Product
Description/Top 5
Countries 2009 2008
3901 Ethylene, Primary
form 126.167 173.660

Singapore 42.818 37.944


Korea 16.994 20.247
Thailand 12.881 21.386
Japan 11.821 14.047
Malaysia 10.342 15.830
Others 31.31 64.206

3907 Polyether, 104.379 155.903


Expoxide
22.709 34.410
Singapore 21.198 34.282
Taiwan 14.961 11.383
Indonesia 14.515 12.237
Thailand 10.641 24.907
Japan 20.355 38.684
Others

3923 Box, Bag, 89.979 87.975


Closures, etc.

Thailand 16.542 12.493


China 14.901 13.217
Japan 11.678 7.123
Malaysia 7.832 11.397
Hongkong 7.712 10.270
Others 31.314 33.475

3920 Plate, Sheet and 83.645 101.515


Cell

Korea 13.081 12.149


Malaysia 12.607 10.745
Japan 10.006 10.935
Indonesia 9.493 13.072
USA 8.704 9.615
Others 29.754 44.999
3902 Other Olefin
Primary 74.492 167.810

Singapore 22.245 40.155


Korea 16.401 25.579
Thailand 9.008 17.084
Japan 7.929 11.817
Taiwan 4.172 26.541
Others 14.737 46.634
3921 Other Plate and
Sheets 69.394 76.763

Japan 18.110 15.659


Malaysia 17.811 19.085
USA 11.878 11.874
Thailand 3.492 3.276
Indonesia 3.272 6.339
Others 14.831 20.530
3910 Silicone, Primary
form 66.701 102.195

Korea 34.294 46.236


Japan 12.536 38.913
Norway 5.361 0.527
USA 3.877 4.110
Thailand 3.232 2.780
Others 7.401 9.630
3919 Self Adhesive
Materials 56.431 68.692

Japan 19.731 21.922


Korea 6.847 6.711
China 5.159 5.813
Malaysia 4.347 5.579
Singapore 3.823 6.666
Thailand* 2.806 2.991
Other 13.718 19.090
3926 Other articles of
Plastics 52.826 69.988

China 10.076 11.405


Hongkong 7.836 16.778
Japan 6.584 6.554
Thailand 5.438 6.482
USA 3.897 4.098
Others 18.995 24.671

3917 Tube, pipe, hoses


and fit 38.808 44.030

Spain 12.763 21.346


USA 9.331 5.646
Japan 7.815 7.062
China 2.690 2.906
Germany 1.240 1.721
Thailand* 0.284 0.301
Others 4.685 5.048
3906 Acrylic Polymers 29.550 27.857

Japan 7.948 4.877


Taiwan 6.628 5.838
Singapore 5.304 4.436
Thailand 2.207 2.633
Indonesia 1.750 2.168
Others 5.173 7.455
3903 Styrene, Primary
Forms 29.652 52.861
Korea 9.131 15.453
Taiwan 4.949 8.899
Malaysia 3.735 9.315
Japan 2.455 6.164
Thailand 1.635 3.112
Others 7.747 9.918
3909 Amino-Resin,
Primary Form 25.250 38.945

Singapore 9.406 13.804


Malaysia 3.507 4.518
Japan 2.403 4.790
Thailand 2.077 2.513
India 1.192 2.620
Others 6.665 10.700

3924 Tableware and


household of
plastics 20.925 18.896

China 12.100 9.615


USA 1.469 1.526
Korea 1.461 0.841
Malaysia 1.374 1.331
Thailand 1.324 1.700
Others 31.970 3.883

3912 Cellulose of
chemicals 19.389 15.702
USA 11.638 7.345
Germany 1.390 1.653
China 1.126 0.976
Netherlands 0.922 0.997
Sweden 0.707 1.316
Thailand* 0.330 0.175
Others 3.276 3.240

3908 Polyamides 9.588 11.485

Korea 2.899 3.064


Thailand 1.627 1.652
Singapore 1.225 2.782
Japan 1.224 0.852
Taiwan 1.118 0.915
Others 1.495 2.220
3911 Petro Resins,
primary form 9.428 16.084

Japan 3.038 4.869


China 1.564 1.158
USA 1.135 3.894
Korea 0.852 1.140
Singapore 0.790 1.633
Thailand* 0.075 0.244
Others 1.974 3.146
Source : National Statistics Office and World Atlas

Based on the Philippine Trade Statistics, the country imported a total amount of
Plastic resins amounting to US$948.386 million in 2009 a decreased of 35.40%
compared in 2008 which totaled to US$1,284.097 million. The country imported mostly
raw materials of plastics since there are no domestic factories of such products. Top
imported raw materials of plastics resin in 2009 which include ethylene which amounts
to US$126.166 million, polyether, expoxide at US$ 104.379 million, other olefin primary
at US74.492 million , silicone, primary form at US$66.701 million, self adhesive
materials at US$56.431 million. On the other hand, the finished plastic materials that
the Philippines imported were box, bag, closures at US$89.979 million, plate and
sheets at US$83.645 million, tube, pipes and hoses at US$38.808 million and tableware
and houseware at US$20.925 million.

Meanwhile, top importing countries of resins (LDPE, HDPE) include Singapore,


Thailand, Korea, Japan, USA and China. However, the major factors affecting supply
and demand of resins to fluctuate or change because of fluctuating price of resins in the
market which caused by the feedstock costs or raw material costs, rail congestion,
imports, exports and new capacity, and unstable global crude oil prices which becomes
expensive and since the major raw materials in production of resins are imported from
abroad and prices are subject to currency changes, fluctuating currency has a negative
effect on the downstream industry because of the limited purchasing power of their
market., most multinational such as Procter & Gamble and Colgate now outsource
manufacturing operations to Thailand, Vietnam and other countries with a cheaper cost
of production. Wholesale clients are diminishing. As for the consumer market, the
downstream firms are having difficulty in managing their costs due to the limited budget
of consumers.

In the middle of economic crisis suffered by the world recently, the business
climate in the plastic raw material industry and plastic industry in the Philippines are
facing a serious challenge. Plastic raw material industry is influence by the fluctuation of
global crude oil price. As a result, the price of naphtha as the raw material of olefin
industry (ethylene and propylene) is not stable. The other red tape is the unbalance
between supply and demand, so it encouraged the increase of plastic raw material
price, such as PE resin and PP resin.
When the global crude oil price was increased to reach US$ 141 per barrel by
the middle of 2008, the price of both commodities was increased to reach US$ 2,000
per ton. In September 2008, global crude oil price was decreased to a level of US$
109.73 per barrel, PE and PP plastic raw material price was decreased to become US$
1,600 – US$ 1,650 per ton. In January 2009, the global oil price was fell to the lowest
level of about US$ 41.96 per barrel, the price of PE and PP in the global market was still
at the level between US$ 790 – US$ 850 per ton. The result of plastic raw material price
movement, which was becoming anomaly (a situation that deviates from the normal
condition), local upstream petrochemical industry was becoming sluggish. Some
producers had difficulty in increasing production. For example, PT Polytama Propindo
has not the courage to increase their production, because they are waiting for the price
improvement.
PHILIPPINE ANNUAL DEMAND AND SUPPLY OF LDPE RESINS/PELLETS

Philippine Demand
Year Tons
2000 262,593
2001 267,651
2002 279,602
2003 269,949
2004 272,401
2005 274,984
2006 265,111
2007 272,820
2008 270,972
2009 269,634

Philippine Supply
Year Tons
2000 250,322
2001 249,462
2002 247,562
2003 247,321
2004 244,765
2005 234,990
2006 233,989
2007 231,987
2008 229,871
2009 229,678

SOURCE: National Statistics Office Data


Philippine Plastics Industry Association Data