Plastics market in flux
- Published: 7/06/2011 at 02:36 PM
- Online news:
China's chemical consumption causes big price changes and market slump. SCG chemicals diversifies with microwaveable plastics.
Cooking with plastic made from Siam Cement Group's new microwaveable melamine compound, in the photo above.
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CHEMICALS & PLASTICS: SCG Chemicals aims for 20, Higher output to offset weak China demand by Nareerat Wiriyapong
Slowing demand from China has lowered petrochemical spreads in the second quarter, but increasing production volume and expected market recovery in the second half could bolster SCG Chemicals' year-on-year revenue growth to 20% this year.
The Siam Cement Group (SCG) unit projected that its revenue will rise by 20% this year from 144.3 billion baht last year as production volume should rise 40% after its suspended projects in Map Ta Phut resumed, said president Cholanat Yanaranop
The projection was based on expectations that global ethylene output would increase by another 11 million tonnes this year from about 140 million tonnes in 2010.
"The petrochemical business has weakened this quarter from three months earlier as China slows down its consumption. This has caused a drop in spreads as oil prices have been relatively unchanged at $110 per barrel," Mr Cholanat said.
The spread between naphtha and high-density polyethylene (HDPE) has fallen from $400 a tonne in the first quarter to $300 at present while propylene spreads had slipped below $700 per tonne quoted in the first three months, he acknowledged.
But consumption in China is likely to recover in the third quarter, the crop season when demand will increase for packaging. Spreads are expected to improve further in the final quarter but would still be less than the rate quoted last year, Mr Cholanat added.
In a related development, SCG Chemicals yesterday announced its partnership with Srithai Superware, the SET-listed melamine and plastics producer, in the manufacturing of microwaveable melamine compound for export to Europe under the patented WaveMe brand.
Under the partnership, SCG Chemicals will supply melamine compounds for Srithai to produce melamine containers. Currently, the global market for melamine compounds amount to 120,000 tonnes annually, with expected annual growth of 5%.
Thai MFC Co, a subsidiary of SCG Chemicals, is currently producing 300 tonnes a year of this special-grade melamine compound at its factory in Rayong. With an investments of US$2-3 million, the company targets to increase the production to 2,000 tonnes a year in 2013.
Thai MFC managing director Preeda Vatchrathiensakul said the microwaveable grade of melamine is 30% more expensive that the standard product which is now quoted at $2,000 per tonne. The innovative product initially targets at the hotel, restaurant and catering sector, the primary target of Srithai.
Mr Cholanat added that WaveMe was one of SCG Chemicals' high value-added (HVA) products. The company this year will step up research and development budget to 500 million baht from 300 million spent in 2010.
(Source: Bangkok Post, CHEMICALS & PLASTICS, SCG Chemicals aims for 20, Higher output to offset weak China demand, 7/06/2011, Nareerat Wiriyapong, link)
Petrochemical and Plastics Vocabulary
petrochemical - chemicals made from oil ปิโตรเคมี (See Wikipedia)
in flux - in a state of flux, constantly changing, nothing remains the same for long
market slump - when demand in a market goes down, prices fall (revenue, profit and income likely falls too, business is not good for a time)
diversify (verb) - add variety to what you do (different products, services, businesses), the idea is that while some businesses don't make money, other businesses will be making money
diversification (noun) - the process of adding new products (marketing diversification) or new assets (financial diversification)
spread - price spread, difference between prices (or some other rate)
spread between X and Y - the difference between price X and Y (also determines profit when you buy at price X and sell at price Y)
petrochemical spreads - the difference between the prices of petrochemicals
drop in spreads - decrease in the difference between two prices
propylene spreads - (See below)
spread between naphtha and high-density polyethylene (HDPE) - (See below)
Siam Cement Group (SCG) - a large conglomerate founded in 1913 with businesses in the petrochemicals, paper and packaging, cement, building products and distribution, 30% owned by the Crown Property Bureau (See website and Wikipedia)
barrel - the part of a gun that a bullet is fired through ลำกล้องปืน
naphtha - flammable liquid mixtures of hydrocarbons, a distillation product from petroleum or coal tar used in the petrochemical industry for producing olefins in steam crackers (See Wikipedia)
cracking - breaking large hydrocarbons into smaller pieces (See explanation)
cracker - a factory that does cracking (See Wikipedia)
high-density polyethylene (HDPE) - a hard plastic that can resist high temperatures and chemicals, used for plastic containers, even fuel tanks for cars, pipes, and insulators (See Wikipedia)
propylene - "the second most important starting product in the petrochemical industry after ethylene. It is the raw material for a wide variety of products. Manufacturers of the plastic polypropylene account for nearly two thirds of all demand. Polypropylene is, for example, needed for the production of films, packaging, caps and closures as well as for other applications. In the year 2008 the worldwide sales of propene reached a value of over 90 billion US dollars," also known as "propene" (See Wikipedia)
ethylene - a petrochemical used in the production of polyethylene, the world's most widely used plastic (See Wikipedia)
melamine - a very durable plastic used in many products: "Formica, and melamine foam, a polymeric cleaning product. The end products include countertops, dry erase boards, fabrics, glues, housewares, dinnerware, cooking spoons, guitar saddles, guitar nuts, and flame retardants. Melamine is one of the major components in Pigment Yellow 150, a colorant in inks and plastics" (See Wikipedia)'
microwaveable melamine compound - a type of melamine that can be microwaved (that can be used in plastic food containers to cook food in a microwave oven)
compound - chemical compound, a chemical substance that is a combination of other substances, usually a special combination with special features such as a plastic that will not melt when microwaved (See Wikipedia)
microwave oven (noun) - a small cheap kitchen appliance used to heat and cook food using microwave radiation (See Wikipedia)
microwave (verb) - to cook or heat food with a microwave oven
microwaveable (adjective) - can be safely heated in a microwave oven (some plastics will melt)
container - a thing used to keep other things inside ตู้บรรจุสินค้า
melamine container - a container (bowl, plastic box with lid) made out of melamine (example: a plastic melamine container that can be used to heat and cook food in a microwave oven)
offset - change in the opposite direction, reduce by moving in the opposite direction, counter-balance, compensate in the opposite direction ("x offsets y" means "x reduces the effect of y"), make up for (profits from the manufacturing business offset losses from the retail business) (See glossary)
demand - the need and desire to buy goods and services by households and businesses
second quarter - the second group of three months in a year (4th, 5th, 6th) used for purposes of budgeting and reporting within companies, government and other organizations
volume - the quantity or amount of something
expected - believe will happen คาดว่า (จะเกิดขึ้น)
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
bolster - to make something stronger or more effective ทำให้เข้มแข็ง
year-on-year - compared with the same period last year (same month, quarter or half year)
revenue - income from taxes or business activities รายได้
projected - expected, forecast, the amount that experts believe (forecast) will happen in the future
projection - guessing a future amount, a calculation or guess about the future based on information that you have การคาดคะเน
suspended - stopped for a period of time (temporarily)
expectations - what people believe will happen in the future การคาดคะเน
global - throughout the world, all over the world, including the whole world ทั่วโลก, ทั้งโลก
consumption - money spent by households and families on goods and services (See Wikipedia) การบริโภค
slipped below - fell below (a certain quantity or value)
acknowledge - saying that you accept that something is true
recover - when the situation improves, gets better, to become healthy and fit again การฟื้น
packaging - the container or covering for a product while it is waiting to be sold in stores
improve - to get better ดีขึ้น
quote a price - when a person selling produce tells you what the price of the product is
rate quoted last year - the rate (price per amount) that the product cost last year
In a related development, ... - in another story related to this story, ...
partnership - when businesses work together on a business project (sharing profits and risks)
producer - a person who makes the practical and financial arrangements needed to make a film, play, television or radio programme ผู้อำนวยการสร้างภาพยนต์, ผู้ผลิต
brand - a type of product made by a particular company ตรา, ยี่ห้อ
annually (adverb) - happening every year ทุกๆปี
annual (adjective) - happening once a year ประจำปี
subsidiary - (of a business company) owned or controlled by another company บริษัทในเครือ a company that is owned by a larger company บริษัทลูก
targets - goals or levels you plan to achieve
innovative - using new methods or ideas เกี่ยวกับการปรับปรุงใหม่, ที่เต็มไปด้วยจิตใจปฏิรูปใหม่
initially - at the beginning, at first ในเบื้องต้น, ในระยะต้น
catering - the job or organising the food and drinks for an event such as a party or meeting การจัดเลี้ยง (See Wikipedia)
sector - a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
hotel, restaurant and catering sector - all the companies in the companies that own hotels and restaurants
primary - first and most important
target - a goal เป้าหมาย
value added - at each stage of the production, the amount that the value of a product increases (See Wikipedia)
high value-added (HVA) - some business project (venture, activity) that makes a lot of money (adds a lot of value to raw products)
Research and Development (R&D) - creative work within a company aimed the creation of new products and the improvement of existing products and processes (See Wikipedia and Google Definitions)
budget - the amounts of money that an organisation has available to spend on different things during a period งบประมาณ (See Wikipedia)
spent - used ที่ใช้ไป
About the author
- Writer: Jon Fernquest
Position: Assistent Manager Educational services