Rise ofchemical sector

Rise of the chemical sector

7:00 AM, 24th January 2018
A representative image of chemical Industry. (File photo)
A representative image of chemical Industry. (File photo)

By Namrata Sharma

Being an important financial hub, South East Asia is home to some of the preeminent emerging countries in the world. The region, by and large, has continued to export raw materials and import manufactured goods. The chemical industry in the region is on a solid footing, with Indonesia, Malaysia, and Thailand among the lucrative markets. Singapore too has emerged as one of the leading chemical industry hubs with petrochemical and speciality chemical products creating a window of opportunity. Singapore is further expanding its chemical industry by focusing on high value-added speciality chemicals. A majority of leading chemical companies run their manufacturing and research & development centres in South East Asia. South East Asia chemical sector produces all three ie. basic, speciality and consumer chemicals.

Singapore Offers Promising Outlook for Specialty Chemicals

Singapore is home to some of the world’s largest chemical plants. The hub of the chemical industry in Singapore is Jurong Island. Singapore currently plays host to over 100 leading chemical companies. Specialty chemical companies are shifting from developing products to solutions. Hence, various research institutes in Singapore offer industry-relevant research and development through collaboration with companies to develop innovative solutions. For instance, the Institute of Chemical and Engineering Sciences (ICES) located at Jurong Island is focusing on supporting top chemical companies to develop new solutions. Moreover, in order to comply with regulatory and environmental standards, companies are focusing on developing eco-friendly solutions.

The growing demand from end-use industries has increased growth prospects for various speciality chemicals such as speciality polymers, electronic chemicals, and mining chemicals. Singapore is likely to further expand the chemical industry by producing speciality chemicals that serve areas such as offshore and marine engineering, lubricants and water treatment. Hence, many chemical companies have benefited from leveraging Singapore as their manufacturing hub.

Singapore continues to support chemical industry, as various initiatives by the government are underway to improve sustainability and competitiveness of Jurong Island. For example, Jurong Island Version 2.0 initiative focuses on providing alternative feedstock sources including LPG (Liquefied Petroleum Gas) to reduce the cost of the plants. 

Chemical companies in South East Asia are also focusing on improving efficiency, productivity and flexibility by implementing automation and digitalization systems at the chemical plants. Also meeting the demand for complex chemical production processes.

Economic Growth in South East Asia to Boot Sector

According to the United Nations and Social Commission for Asia and the Pacific, economic growth in South East Asia is likely to reach 4.8 percent in 2018. South East Asia has witnessed a remarkable economic progress in the recent years. Much of its growth is attributed to its expanding labour force and shift of workers from agriculture to manufacturing. In order to sustain economic, growth many companies are focusing on multiplying their productivity. The ASEAN, comprising ten Southeast Asian states is focusing on challenges restricting foreign investment, and to build critical foundations including logistics, infrastructure, and skilled workforce. Moreover, chemicals under HS Code 29 and 39 are among the top 10 commodities traded within ASEAN countries.

A recent news report also noted that uncertainty in gas price is discouraging investment to develop petrochemical plants in Indonesia. Chemical and pharmaceutical industries are a vital source of direct investment in the country.

In the recent years, South East Asia has also witnessed a growth in bio-based materials and chemicals. Innovative bio-based chemical technologies are creating opportunities in countries like Thailand, Malaysia, and Indonesia. Malaysia, being the second largest producer of palm oil is currently focusing on new oleochemicals, while Thailand is concentrating on bio-plastics. Meanwhile, lack of support by the government and infrastructure presents challenges for bio-based chemicals in Indonesia. 

According to a 3rd Summit Meeting on Chemical Regulations in the Asia Pacific, hazardous substance law is being revised for South East Asia. Vietnam is also planning to establish its own chemical inventory likely to be published in 2018. Meanwhile, Indonesia is coming up with the national database, as per the definition of GHS, more substance may be considered as hazardous. For now, within Asia, only China, Japan, Taiwan, and Korea have established a national existing chemical inventory and have also defined requirements for registration of new chemical.

Chemical companies are actively focused on mergers and acquisitions to diversify and establish themselves in high-growth markets. Chemical companies are shifting their focus from commodity chemicals to intermediates and performance chemicals. Product areas such as isocyanates, acrylic acid, polyamide intermediates and C4 chain chemicals are some of the new targets.

Ease of doing business in South East Asia still poses some challenges. In various countries in South East Asia, there are different policies and procedures for getting investment licenses, taxation, customs formalities, etc. Moreover, external factors such as adoption of new trade policies by the US Administration or the UK leaving the European Union can result in the uncertain growth of the chemical market in South East Asia in the near future.

Meanwhile, changing political dynamics in ASEAN region is leading towards the complex and unpredictable regulations in many countries. Policy uncertainty, particularly in Philippines and Indonesia holds a moderate risk. On the other hand, corruption is one of the notable risks for businesses operating in the ASEAN region. 

Management of Chemical Waste in South East Asia

Philippines, Thailand, and Indonesia are the countries in South East Asia that still lack the knowledge on safe disposal of chemical wastes. However, chemical companies in South East Asia have started investing in the advanced solutions to manage the chemical and hazardous waste. Moreover, standards and regulations have also been established in ASEAN countries for waste management. Companies are increasingly adopting biological treatment, stabilization, chemical oxidation and reduction to treat chemical and hazardous waste. Meanwhile, Suez, Glow Energy and WHA Utilities and Power have started working on a first waste-to-energy power plant in South East Asia. 

The safe manufacture, use and the disposal of various types of chemical are some of the biggest concerns among the regional and national governments. Hence, chemical sector is moving towards handling complex challenges by implementing new procedures and advanced technologies in order to comply with increasingly stringent environmental standards.

Author: Namrata Sharma is Features Writer at Future Market Insights.

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