Asia's unrelenting need for petrochemicals is leading to massive opportunities. In this episode, S&P Global Platts Senior Analyst Eshwar Yennigalla zooms in on how Taiwan's approach to seize opportunities in an evolving global petrochemical market is taking shape.
Download the special report: Taiwan: Seizing opportunities in a changing world
Taiwan's role in Asia's petrochemicals market
By Eshwar Yennigalla
Welcome to the Snapshot, our series that examines the forces driving and shaping global commodity markets today.
Asia’s unrelenting need for petrochemicals is leading to massive opportunities and also quite a few challenges. In this episode, let’s zoom in on the Taiwanese approach towards seizing these opportunities in a changing world by adapting to a new normal.
Taiwan’s role in Asia’s petrochemical markets far outweighs its size. For an island that makes up just 7% of the land mass of the three traditional producers - the other two being Japan and South Korea - Taiwan accounts for more than a fifth of the total ethylene capacity. Its five naphtha-fed steam crackers has a combined ethylene production capacity of 4 million mt/year, compared with 6 million mt/year in Japan and 8 million mt/year in South Korea.
Taiwan’s crackers are also newer and larger, making them more cost competitive and more efficient. Integrated refineries are also giving Taiwan an advantage over other Asian steam cracker operators when it comes to better margins.
CPC has two refineries in Talin and Taoyuan with a combined crude processing capacity of 550,000 b/d, while Formosa has a 540,000 b/d refinery in Mailiao. Both companies have the ability to make feedstock choices, and can include more LPG in their feedstock slate should the economics make sense.
Taiwan’s steam cracker operators are able to switch back and forth when needed as they are able to source LPG feedstock from their own refineries. According to market sources, during the summer months, Taiwanese crackers switch to maximum of 15% LPG intake, as propane prices typically witness a seasonal dip due to lack of demand for heating purposes.
Taiwan is not keeping its success at home – its companies are also eyeing opportunities for external expansion.
Formosa is looking at ethylene capacity expansions in the US, where it is building an ethane-fed steam cracker in Texas with a total ethylene production capacity of 1.15 million mt/year. This is due to start up early this year. Within Taiwan, the company faced difficulties getting approval to build another naphtha-fed steam cracker due to growing environmental concerns.
It is now planning to build another ethane-fed steam cracker in the Gulf Coast, with an initial ethylene production capacity of 1.2 million mt/year. It is planning to double the capacity in the second phase of investment. The company plans to start up its new Louisiana plant after 2021.
Given current market circumstances, external-facing plans such as diversifying feedstock portfolios and going global to set up plants near demand centers are suitable approaches. But more flexible approaches such as investing in using alternate feedstocks at Asian operations could be considered down the line, as this would help Taiwan add further to its predominant geographical advantage.
We delve deeper into Taiwan’s petrochemical markets – including a look at the aromatics space – in our special report titled Taiwan: Seizing opportunities in a changing world, available on Platts.com.
Until next time on the Snapshot, we’ll keep an eye on the market.