BMI's Executive Summary

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BMI's latest Philippines Petrochemicals Report forecasts a revival in petrochemicals output in the country in 2008 when Petron's new facilities come online. However, the country continues to struggle with a lack of feedstock and a relatively small and inefficient local polymers manufacturing sector, which will continue to inhibit growth for the foreseeable future.

JG Summit Petrochemical's revival of its proposed 350,000tpa naphtha cracker for completion in 2009 is intended to address the country's feedstock shortage. The company's polymer plants have been operating at reduced operating rates due to continued high propylene feedstock prices. Another problem facing JG Summit's polymer operations is the decision to cut tariffs on 11 imported midstream petrochemical products. This has put the firm at a competitive disadvantage compared to imported polymer products. In November 2007, JG Summit Holdings said it had increased its stake in JGSPC to 100% by acquiring the 17.7% stake owned by Marubeni. Financial terms and other details of the transaction were not disclosed. JG Summit decided to consolidate its ownership in JGSPC to establish full authority over future strategies for the petrochemical business and reverse the firm's decline.

Despite the problems facing JGSPC, foreign investors are showing increased interest in the Philippines, with Thailand's PTT Chemical examining the possibility of a joint venture with JG Summit Petrochemical, although it would not reveal any details. PTT Chemical plans to invest US$300-400mn to build a petrochemical complex in the Philippines and is seeking a partner for the project. A decision is likely in 2008. PTT has subsidiaries involved in the entire petrochemical chain and exported more than 50,000 tonnes of petrochemical feedstock to the Philippines in 2006, making the country the firm's fifth largest export market. PTT projects that the Philippines will become its third most important market after China and Vietnam in the future, requiring increased capacity to keep up with demand. BMI believes that PTT is likely to seek to construct plants integrated with JG Summit's existing polymer plants in Batangas.

In the first 10 months of 2007, Philippines exported US$835.7mn of chemical products, up 31.6% y-o-y, while petroleum products amounted to US$843.9mn, up 2.7% y-o-y. Each segment represented 2.0% of total exports. According to the Monthly Integrated Survey of Selected Industries (MISSI) for September 2007, the value of production index (VaPI) for the chemicals industry rose 23.9% y-o-y and the VaPI for plastic products was up 9.5% y-o-y. This is a positive outcome following a disappointing first half when the indices recorded a decline.

BMI has revised its method of risk scoring in the petrochemicals sector, introducing dynamic scores that reflect on future growth as well as current capacities and the size of the internal market, along with investment risk assessments of the political, economic and regulatory environments. In the Asia Petrochemicals Business Environment Rankings matrix, the Philippines comes last of five countries under review, with 42.6 points, well below the regional average of 58.7 points and 3.3 points behind Indonesia. The Philippines petrochemicals sector suffers from lack of locally available feedstock and a relatively small and inefficient local polymers manufacturing base, which is incapable of supplying the plastics industry. If announced plans for petrochemicals expansion come to fruition, the country could climb up the rankings, but it is unlikely to exceed India's score. Nevertheless, the Philippines has a supportive business environment in which the petrochemicals industry can grow.

Contents

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Chapter 1 - Executive Summary

Industry Overview

Industry Developments

Regulatory Developments

Industry Forecast

Philippines Petrochemicals Industry SWOT

Philippines Economic SWOT

Philippines Business Environment SWOT

Chapter 2 - Market Overview

Table: Average Capacity Utilisation by Major Sectors (January-August 2006)

Table: Value of Production Index, 2006 (1994=100)

Table: Philippines Exports by Commodity Group July and August 2006

Market Structure

Chapter 3 - Industry Trends and Developments

Supply Overlap In The Philippines

Regulatory Developments

Chapter 4 - Industry Forecast Scenario

Table: Philippines Petrochemicals Sector – Historical Data & Forecasts

Chapter 5 - Economic Outlook

Table: Philippines: Macroeconomic Data And Forecasts

Official Optimism

Business Environment Outlook

Foreign Direct Investment/Trade Relations

Chapter 6 - Company Monitor

Profiles

BASF Philippines

Dow Chemical Philippines

Tosoh

Bataan Polyethylene Corporation

JG Summit Petrochemicals Corp

PNOC Petrochemical Development

Chapter 7 - BMI Forecast Modelling

How we generate our industry forecasts

Chemicals & Petrochemicals Industry

Cross checks

Competitive Landscape for Asia Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.