Published by BUSINESS MONITOR INTERNATIONAL LTD                          Singapore                          Chemicals     ...
Singapore Chemicals                         Report 2009                         Including 5-year industry forecasts by BMI...
Singapore Chemicals Report 2009© Business Monitor International Ltd                                     Page 2
Singapore Chemicals Report 2009CONTENTSExecutive Summary ....................................................................
Singapore Chemicals Report 2009© Business Monitor International Ltd                                     Page 4
Singapore Chemicals Report 2009Executive Summary             Market Overview             The Singaporean chemicals industr...
Singapore Chemicals Report 2009             construction on a SGD30mn (US$19.9mn) manufacturing plant and laboratory based...
Singapore Chemicals Report 2009SWOT AnalysisSingapore Chemicals Industry SWOTStrengths             Government-provided inf...
Singapore Chemicals Report 2009Singapore Political SWOTStrengths              Singapore enjoys a very stable political sys...
Singapore Chemicals Report 2009Singapore Business Environment SWOTStrengths             Singapore is the least corrupt cou...
Singapore Chemicals Report 2009Market Overview             The chemical industry has always been a major pillar of Singapo...
Singapore Chemicals Report 2009             industry’s R&D efforts. It is a centre that promotes industry innovation, tech...
Singapore Chemicals Report 2009             The island was originally a group of seven small islands, which had housed ref...
Singapore Chemicals Report 2009             Jurong Island. In addition it also provides water and waste water management, ...
Singapore Chemicals Report 2009              year the chemicals cluster has experienced maintenance shutdowns, which has a...
Singapore Chemicals Report 2009             Of the leading 10 flavours and fragrances companies in the world, nine have op...
Singapore Chemicals Report 2009             Semiconductor. Overall, there has been growing domestic demand for electronic ...
Singapore Chemicals Report 2009             the growth of Singapore’s ‘external’ economy, the government has been actively...
Singapore Chemicals Report 2009                      biofuel. The plant will produce NExBTL, which is thought to be the cl...
Singapore Chemicals Report 2009                      In June 2008 Samsung and Sitronic opened a SGD1.36bn (US$0.9bn) 300mm...
Singapore Chemicals Report 2009                      capacity twofold. The expansion is earmarked for completion by June 2...
Singapore Chemicals Report 2009                      SINOPEC lubricant oil was released in June 2007, and marked the start...
Singapore Chemicals Report 2009                      cutting-edge collaborative approach that combines both biology and ch...
Singapore Chemicals Report 2009Industry Forecast Scenario             Singapore has experienced strong development recentl...
Singapore Chemicals Report 2009              Singapore has received significant investment in renewable energy from key co...
Singapore Chemicals Report 2009             For 2008, chemicals industry imports are estimated at SGD25.9bn (US$17.38bn). ...
Singapore Chemicals Report 2009             The slowdown in Q109 was broad based, with declines seen in most sectors. The ...
Singapore Chemicals Report 2009             notable exception of China. Shipments to China rose by 14% y-o-y in March, fol...
Singapore Chemicals Report 2009Table: Singapore – Economic Activity, 2006-2013                                 2006       ...
Singapore Chemicals Report 2009Company MonitorEastman Chemicals Singapore Eastman Chemicals is a Fortune 500 company that ...
Singapore Chemicals Report 2009 Financial Highlights In 2008 Eastman achieved global sales of US$6.7bn with a gross profit...
Singapore Chemicals Report 2009 ExxonMobil Chemicals With petrochemical manufacturing and marketing operations in         ...
Singapore Chemicals Report 2009 reported to be SGD$3bn (US$1.99mn) In August 2008 Exxonmobil opened a Dormitories and Safe...
BMI SINGAPORE CHEMICALS REPORT 2009
BMI SINGAPORE CHEMICALS REPORT 2009
BMI SINGAPORE CHEMICALS REPORT 2009
BMI SINGAPORE CHEMICALS REPORT 2009
BMI SINGAPORE CHEMICALS REPORT 2009
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BMI SINGAPORE CHEMICALS REPORT 2009

  1. 1. Published by BUSINESS MONITOR INTERNATIONAL LTD Singapore Chemicals Report 2009 ISSN: 1749-2084Including 5-year industry forecasts © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of BusinessBusiness Monitor International Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the expressMermaid House, 2 Puddle Dock consent of Business Monitor International Ltd.London EC4V 3DS UKTel: +44 (0)20 7248 0468 All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliableFax: +44 (0)20 7248 0467 at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy oremail: subs@businessmonitor.com completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors,web: http://www.businessmonitor.com inaccuracies or omissions affecting any part of the content.
  2. 2. Singapore Chemicals Report 2009 Including 5-year industry forecasts by BMIPart of BMI’s Industry Survey & Forecasts SeriesPublished by: Business Monitor InternationalPublication date: June 2009 Business Monitor International © 2009 Business Monitor International. Mermaid House, All rights reserved. 2 Puddle Dock, London, EC4V 3DS, All information contained in this publication is UK copyrighted in the name of Business Monitor Tel: +44 (0) 20 7248 0468 International, and as such no part of this publication Fax: +44 (0) 20 7248 0467 may be reproduced, repackaged, redistributed, resold in email: subs@businessmonitor.com whole or in any part, or used in any form or by any web: http://www.businessmonitor.com means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.
  3. 3. Singapore Chemicals Report 2009© Business Monitor International Ltd Page 2
  4. 4. Singapore Chemicals Report 2009CONTENTSExecutive Summary .........................................................................................................................................5SWOT Analysis.................................................................................................................................................7 Singapore Chemicals Industry SWOT.................................................................................................................................................................... 7 Singapore Political SWOT..................................................................................................................................................................................... 8 Singapore Economic SWOT................................................................................................................................................................................... 8 Singapore Business Environment SWOT ............................................................................................................................................................... 9Market Overview.............................................................................................................................................10 Industry Performance .......................................................................................................................................................................................... 13 Table: Singapore’s Chemicals Industry Output, 2004-2006 ................................................................................................................................ 14 Speciality Chemicals............................................................................................................................................................................................ 14 Electronic Chemicals........................................................................................................................................................................................... 15 Pharmaceuticals .................................................................................................................................................................................................. 16 Business Environment.......................................................................................................................................................................................... 16 Projects And Expansions ..................................................................................................................................................................................... 17 Earlier Developments .......................................................................................................................................................................................... 20Industry Forecast Scenario ...........................................................................................................................23 Table: Singapore’s Chemicals Industry, 1993-2012 (SGDmn) ............................................................................................................................ 24 Macroeconomic Forecast .................................................................................................................................................................................... 25 Table: Singapore – Economic Activity, 2006-2013.............................................................................................................................................. 28Company Monitor...........................................................................................................................................29 Eastman Chemicals Singapore ............................................................................................................................................................................ 29 ExxonMobil Chemicals ........................................................................................................................................................................................ 31 Mitsui Chemicals ................................................................................................................................................................................................. 33 Dow Chemical Pacific (Singapore)) .................................................................................................................................................................... 35BMI Forecast Modelling .................................................................................................................................36 How We Generate Our Industry Forecasts .......................................................................................................................................................... 36 Petrochemicals Industry ...................................................................................................................................................................................... 36 Cross Checks ....................................................................................................................................................................................................... 37© Business Monitor International Ltd Page 3
  5. 5. Singapore Chemicals Report 2009© Business Monitor International Ltd Page 4
  6. 6. Singapore Chemicals Report 2009Executive Summary Market Overview The Singaporean chemicals industry is one the largest sectors in Singapore. The Singaporean government has been promoting the industry since the mid-1990s, with the aim of increasing the share of chemicals and petrochemicals of total manufacturing output to 30% by 2010. The country has a chemical complex on Jurong Island, Singapore, acting as a base for more than 94 domestic and international companies. The chemical industry output accounted for about SGD98.1bn (US$65.05bn) in 2008, contributing more than one-third the country’s manufacturing output. Industry Performance Manufacturing output shrank by 13.5% year-on-year in December 2008. The growth of the sector was affected throughout the year by the fluctuation in biomedical manufacturing output. The three-month moving average index for December declined 10.5% and the seasonally adjusted month-on-month index for December was 11% below that of the previous month. For the full year in 2008, total manufacturing output dipped 4.1% compared with 2007. Fixed asset investment (FAI) in Singapore’s chemical industry was reported at SGD8.55bn (US$5.68bn) for the January-December 2008 period. Industry Developments In January 2008 it was reported that Finnish refining and marketing company Neste Oil will be investing SGD1.2bn (US$800mn) to build an 800,000 tonne per year plant to manufacture biofuel. The plant will produce NExBTL, which is thought to be the cleanest renewable diesel available. The plant will use the company’s proprietary technology and will use palm oil as the main input material. Construction will begin in 2008 in the Tuas Industrial Zone with completion expected in 2010. In February 2008 it was reported that Nikko Chemicals had invested SGD38.4m (US$ 25.4) in a new surfactant plant to make ethoxylated surfactants that would be used in the cosmetic industry. The site is to be built on Jurong Island over 1.2 hectares (ha) and is expected to be operating by 2009, producing 3,000 tonnes in its first two years. Later the month it was reported that the Germany-based LANXESS will invest SGD823mn (US$545) in building a production plant on Jurong Island to manufacture 100,000 tonnes per year of butyl rubber. Construction will begin in 2009 and by 2010 supply of the raw material required by the plant, Raffinate 1, will be delivered by Shell Eastern Petroleum to the site. The plant is expected to require more than 200 staff once fully operational. Meanwhile, in June 2008 Samsung and Sitronic opened a SGD1.36bn (US$0.9bn) 300mm silicon wafer factory in Singapore. The factory, which began production in June, should have the capacity to produce 300,000 wafers each month by 2010, making it one of the largest wafer factories in the world. In October 2008 it was reported that Japanese firm Kanto Kagaku, which makes speciality chemicals, began© Business Monitor International Ltd Page 5
  7. 7. Singapore Chemicals Report 2009 construction on a SGD30mn (US$19.9mn) manufacturing plant and laboratory based in Tuas. Operations are expected to begin in the last quarter of 2009, when production of highly purified chemicals will begin. SGD Future Risks The economic downturn and weak demand is expected to have a significant effect on manufacturing levels and immediate investment. Singapore is also experiencing a threat from resource-rich countries such as Indonesia and Malaysia where there are indigenous hydrocarbon feedstock resources and low production costs for petrochemicals. If these countries improve their support infrastructure and, in the case of Indonesia, address political stability concerns, they may attract business that might otherwise go to Singapore. Similarly, diversification from oil to petrochemicals in Middle Eastern economies may provide new competition for Singapore. China and India continue to increase their capabilities within this sector and this may also influence Singapore’s position in the chemicals industry. The introduction of the EU Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) legislation is expected to be one of the biggest obstacles in the future of Singapore’s chemical industry, and failure to educate chemical companies on compliance could result in a decrease of export levels to the EU, which accounts for a significant proportion of Singapore’s exports.© Business Monitor International Ltd Page 6
  8. 8. Singapore Chemicals Report 2009SWOT AnalysisSingapore Chemicals Industry SWOTStrengths Government-provided infrastructure, financial incentives and assistance in project implementation have all been central elements of Singapore’s investment promotion strategy Companies in the chemicals industry find Singapore a compelling location, where they have ready access to a network of industry partners and service providersWeaknesses Lack of indigenous resources could become a weaknessOpportunities Developments on Jurong Island to improve storage, handling and logistics Jurong Island has been reclaimed through the amalgamation of seven islands off the southern coast of Singapore, for the purpose of housing the chemicals industry. The Institute of Chemicals and Engineering Sciences on Jurong Island will help research and development (R&D) in a major way Beyond the attractions of lowered tariffs, free trade agreements (FTAs) also mean a more liberalised investment climate and closer co-operation through mutual recognition of standards and test results, all of which are likely to improve the operating environment for companies based in Singapore Land and utilities are major cost components for the chemicals industry. The government has taken steps to reduce the price of industrial land, and is likely to continue to ensure that sufficient land at internationally competitive prices is made available to investorsThreats EU REACH Legislation restricting the freedom and mobility of chemical imports into the EU Diversification of Middle Eastern economies Development of surrounding resource-rich countries infrastructure in chemical production Global economic downturn affecting demand for chemical products Increased political instability in Malaysia or Indonesia could result in reduced economic growth within the region, negatively affecting demand for petrochemicals, fine and speciality chemicals, and also leading to a decline in foreign investment© Business Monitor International Ltd Page 7
  9. 9. Singapore Chemicals Report 2009Singapore Political SWOTStrengths Singapore enjoys a very stable political system, following the countrys second change of leadership in 40 years, which saw Lee Hsien Loong – son of the nations founding father Lee Kuan Yew – take over as prime minister in 2004 Official promises have been made to eradicate Singapores reputation as an overprotective nanny-state, with efforts to enhance freedom of expressionWeaknesses Singapore is not a properly functioning democracy. The ruling Peoples Action Party (PAP) has all but two seats in parliament, and the opposition is restricted from campaigning through tight control over political debate and frequent use of libel laws The government has yet to improve the situation for the less well off in Singapore, with a rising wage gap between the top earners and the lowest paidOpportunities Lee is proving himself a capable leader, moving away from the shadow of his father by repeatedly calling for more openness Singapore is leading its regional neighbours in signing free trade agreements. Increased regional integration is likely to give the island more influence in AsiaThreats There are fears that Singapores foreign policy alignment with the US will cause the city-state to become a target for terror attacks launched by Muslim extremists The last election showed that segments of the electorate are becoming disenchanted with the PAP and its repression of opposition voicesSingapore Economic SWOTStrengths Singapores monetary policymakers have gained credibility by guiding the exchange rate to offset inflationary pressures while ensuring stable growth Singapores current account surplus remains over 20% of GDP and its external finances are in good shape. This is reflected by the worlds credit-rating agencies, which continue to award Singapore top marks for external strengthWeaknesses The trade-dependent economy remains exposed to global trends in demand for electronic goods, which account for around half of Singapores non-oil exports Singapore faces a number of long-term economic problems. Competition from low- cost neighbouring countries is on the increase and its population is ageing rapidlyOpportunities In the face of regional competition for both exports and investment, the government is encouraging economic diversification to boost competitiveness. New areas being promoted are biomedical sciences, tourism, medical and financial servicesThreats There is significant state involvement in the private sector, with the government refusing to disclose the assets of the Government of Singapore Investment Corp (GIC). The GIC is one of the worlds largest institutional investors, managing foreign exchange reserves and government funds worth more than US$100bn. Without increased openness, investor confidence could be damaged and domestic growth hindered Singapores exporters will need to constantly adapt to competition from low-wage economies such as China and India© Business Monitor International Ltd Page 8
  10. 10. Singapore Chemicals Report 2009Singapore Business Environment SWOTStrengths Singapore is the least corrupt country in Asia, according to Transparency International, a Berlin-based anti-corruption watchdog Strikes and labour protests will remain rare, if not absent, in Singapore for the foreseeable future due to the governments autocratic insistence on a business- friendly environment. Policymakers will continue to use heavy-handed tactics to ensure the unions stay pliantWeaknesses Political and economic stability has come at a price. The Singapore government censors the media and limits the distribution of foreign publications. The judiciarys record of siding with prominent politicians calls into question the true extent of its neutrality in any contract dispute involving a politically sensitive issueOpportunities Due to the lack of progress at the World Trade Organisation (WTO), the Singaporean government has committed the country to sign 19 bilateral free-trade agreements. Singapore has already signed agreements with several countries, including the US, Japan, India and Australia Singapore has one of the best business operating environments in Asia. This is reflected by Singapores second place in the Index of Economic Freedom league table compiled by the Heritage Foundation and the Wall Street JournalThreats Singapore is potentially at risk of a terrorist attack. The city-state has previously been identified as a target by Islamist militants from neighbouring Indonesia and elsewhere. Singapores adjacency to the Malacca Straits means that its trade is vulnerable to international piracy© Business Monitor International Ltd Page 9
  11. 11. Singapore Chemicals Report 2009Market Overview The chemical industry has always been a major pillar of Singapores manufacturing sector. In 2008 the industrys output totalled SGD98.1bn (US$65.06bn). This was a 16.65% increase from the year before and represented more than one-third of Singapores total manufacturing output. The chemical industry has since overtaken the electronics sector as the largest contributor to Singapores manufacturing output. The chemicals cluster comprises petroleum refining, petrochemicals, and industrial and speciality chemicals. In 1993, the Singapore government established an overall development plan for the chemicals industry. This plan sets an objective for the chemicals industry to grow in proportion to the rest of the manufacturing economy, and maintain a minimum of 21% of the nation’s total manufacturing output. Singapore Chemical Industry Petro- Speciality Electronic Pharma- Petroleum chemicals Chemicals Chemicals ceuticals Consumer Hydrogen Polymer care Isopropyl Peroxide & Additives Fragrances Silicon Alcohol Ammonium Specialities Hydroxide Singapore has successfully encouraged numerous foreign companies to invest in its chemicals industry by offering incentives and providing infrastructure and seed-finance. Multinationals lead the nation’s chemicals industry. The government continues to view chemicals as a significant area for future growth and expects to increase chemical output. Since the mid-1990s, the government’s strategy has been to move downstream, from petroleum refining to petrochemicals and chemicals production. Also, the government expects to increase the share of petrochemicals and chemicals in total manufacturing output to 30% by 2010. Domestic demand for chemical coatings, flavours, fragrances, mineral additives and speciality chemicals has been increasing. The government also has plans for encouraging industry integration as well as R&D in the sector. The Institute of Chemical and Engineering Sciences was established on Jurong Island in 2002 to support the© Business Monitor International Ltd Page 10
  12. 12. Singapore Chemicals Report 2009 industry’s R&D efforts. It is a centre that promotes industry innovation, technology and research partnership as well as offering a range of student training programmes. The Chemical and Process Technology Centre was established for manpower training. Located on Jurong Island it is owned by the Economic Development Board. It is the first live-training facility in the world for training technicians and in 2008 The Chemical and Process Technology Centre partnered with training provider Petrofac to help develop new talent. The nation aims to allocate more resources to research and innovation to transform the economy to compete on knowledge, innovation and talent, along with cost- effectiveness and efficiency. It will invest around SGD7.5bn (US$4.7bn) in the chemical sector during the five years ending 2011 to sustain its innovation-driven growth under the Science and Technology Plan 2010. Major chemical companies in Singapore include Singapore-based Chemicals Corporation of Singapore and SembCorp, US-based Eastman Chemicals, Dow Chemical, Huntsman, Philips Petroleum, Nexsol, Tate and Lyle and ExxonMobil Chemicals, Malaysian Gulf Chemicals, Japanese Hitachi Chemicals, Mitsubishi Chemicals and Toshiba, Switzerland-based Lonza and CIBA (part of BASF), and Australian-based Natural Fuel. Companies operating in Singapore that focus predominantly on speciality chemicals include UK-based Imperial Chemical Industries (ICI), Witco, France-based Rhodia, Switzerland-based Clariant, and Germany-based Degussa-Huls. The Singapore Chemical Industry Council (SCIC) is the official body representing the chemicals industry of Singapore in the private sector. SCIC was officially formed under the umbrella of Singapore Manufacturers’ Association (SMA) in 1979, and is affiliated to the Association of South East Asian Nations Chemicals Industries Club (ASEAN-CIC). In June 2007 it was incorporated as an independent body. In 1996, SMA restructured itself as the Singapore Confederation of Industries (SCI) to meet the needs of manufacturers that faced new challenges in an ever-changing economic landscape. Joining the restructuring exercise, the council merged with the Chemicals Industry Group under the SCI, which formed the present council. The new group is now the only body that represents the chemicals industry in Singapore. Its role has also been enlarged to include the petroleum sector as well as companies providing supporting services in the chemicals industry, besides the producers. The establishment of a chemicals industry cluster on Jurong Island is an integral part of the government’s plan to develop the nation’s chemicals industry. This amalgamation project is intended to create major economies of scale, including feedstock availability and transportation/handling through a centralised and co-ordinated logistics-planning centre on the island. The island has more than 94 local and international companies, which together have invested more than S$31bn into speciality chemicals and petrochemicals manufacturing, oil refining and other support facilities.© Business Monitor International Ltd Page 11
  13. 13. Singapore Chemicals Report 2009 The island was originally a group of seven small islands, which had housed refineries on Pulau Ayer Chawan Island (the US-based Esso), Pulau Pesek Island (the US-based Mobil) and Pulau Merlimau Island (Singapore Petroleum) since the 1960s. Since 1984, a petrochemicals complex on Pulau Ayer Merbau Island has housed Petroleum Corporation of Singapore (PCS), Shell, Japan-based Sumitomo Chemicals and Singapore-based The Polyolefin Company (subsidiary of Sumitomo Chemical), among others. The new fully reclaimed Jurong Island has an area totalling 3,200ha, compared with the initial 1,000ha. The seven islands have been amalgamated by reclaiming the channels separating them. The total reclaimed area is eventually expected to reach 2,209ha, and the island as a whole is likely to comprise 4.7% of Singapore’s land mass. The government’s strategy is to build an integrated manufacturing presence on the island, so that sources of feedstock, utilities and logistics are all readily available to new investors. Included are plans for a logistics hub that is likely to facilitate the movement of almost 22mn tonnes of chemicals that are annually produced on the island. Some of the projects on the island include ExxonMobil’s US$2bn investments in ethylene, polyethylene (PE), polypropylene (PP) and oxo-alcohol production facilities reportedly representing the company’s single-largest investment in Asia. Germany-based BASF (now also incorporating CIBA), the US-based Celanese, Eastman Chemicals, Shell Eastern, Japan-based Mitsui Chemicals and Teijin, PCS and Singapore Syngas comprise the other significant investors. The current operating composition of Jurong Island includes four refineries, two ethylene crackers, two aromatics complexes, several downstream units and considerable infrastructure. The Singapore government’s goal is to attract a total of 150 companies by 2010, with combined investment of SGD40bn (US$23bn). The Jurong Island is advantageous for the speciality chemical players as they can leverage the benefits of its cluster strategy. The three key benefits are: The island offers customised infrastructural facilities to meet the needs of speciality chemical companies. It is designed to allow speciality chemical companies to ramp up their operations quickly with much lower capital outlays; The companies have easy access to specialised services such including utilities and logistics. Utilities such as water, steam and waste water treatment, as well as logistics services such as specialised chemicals and warehousing, are provided by independent service providers; The island facilitates a regular supply of feedstock for speciality chemicals companies. Singaporean SembCorp Utilities provides integrated utilities to the chemical companies on Jurong Island. It specialises in waste incineration and also produces and supplies specialised chemical feedstock. Among the key utilities on offer are electricity, natural gas and steam. It provides steam and other key utilities to chemicals and petrochemicals industry clients through its extensive pipe rack network on© Business Monitor International Ltd Page 12
  14. 14. Singapore Chemicals Report 2009 Jurong Island. In addition it also provides water and waste water management, as well as operation and maintenance services. It has a 70 tonnes per day incineration plant, the largest of its kind in Singapore. The following graph displays net investment commitments made by the chemical industry in Singapore until 2005. It displays a mixed trend, with the net investment rising in a particular year and falling in subsequent years. Net investment in the chemicals industry was SGD11.6bn (US$7.70bn) in 2008, up on SGD8.63bn (US$5.72bn) in 2007, a 34.41% rise in net investment. An important development affecting the chemical industry in Singapore is the Net investment Commitments In Chemical Industry introduction of the EU’s REACH 2000-2005 (SGDmn) legislation. Companies importing chemicals into the EU or that contribute 2,500 as part of the supply chain to an eventual 2,000 EU export will have to register extensive technical dossiers about their products 1,500 and potential risk factors to the European 1,000 Chemical Agency (ECHA). Companies failing to meet these deadlines will not be 500 allowed to import into the EU and may 0 face fines or criminal charges. SPRING, 2000 2001 2002 2003 2004 2005 the government body to support Source: Economic Survey of Singapore enterprise in Singapore, has a budget of SGD1mn (US$0.66mn) and, together with the Singapore Chemical Industry Council (SCIC), will be running workshops and offering support and information to enable companies to achieve compliance.Industry Performance Manufacturing output shrank by 13.5% year-on-year in December 2008. The growth of the sector was affected throughout the year by the fluctuation in the biomedical manufacturing cluster. The three-month moving average index for December declined 10.5%. The seasonally adjusted month-on-month index for December was 11% below that of November. For the year of 2008, total manufacturing output dipped 4.1% compared with 2007. According to the Economic Development Board (EDB), Singapore’s chemical output slumped 23.3% y- o-y in December 2008. This decrease was attributed to weak demand causing a number of production and maintenance shutdowns within the area of petrochemicals and specialty chemicals. Petroleum and Petrochemicals also experienced reduced production levels due to a number of manufacturers tightening their inventory control. Petroleum producers also experienced reduced refining margins. Throughout the© Business Monitor International Ltd Page 13
  15. 15. Singapore Chemicals Report 2009 year the chemicals cluster has experienced maintenance shutdowns, which has affected their growth, month by month. The overall output of the chemicals cluster for the year was down 3.6% on 2007. The below graph shows the Index of Industrial Production for chemicals, petroleum, petrochemicals, specialities and others for the period 2000-2005. In 2008, the chemicals industry contributed SGD98.1bn (US$65.10bn) or Index of Industrial Production 37.82% of the total SGD259.34bn 2000-2005 (US$172.00bn) manufacturing output. 140 The chemicals industry reported 120 compound annual growth rate (CAGR) of 100 10% during 2001-2005, for a total of 80 SGD8.84bn (US$4.03bn). Fixed asset 60 40 investment (FAI) in Singapore’s 20 chemical industry was reported at 0 SGD8.55bn (US$5.68bn) in 2008. For 2000 2001 2002 2003 2004 2005 2006 the January-December 2008 period, Chemicals Petroleum Petrochemicals Specialties Others Singaporean manufacturing output Source: Economic Development Board decreased 4.1% y-o-y.Table: Singapore’s Chemicals Industry Output, 2004-2006 2004 2005 2006Overall output (SGDbn) 50.7 66.5 76.19Chemical output as a % of manufacturing output in Singapore 28 32 32.5Fixed asset investment (SGDbn) 1.6 1.9 2.56Petroleum output (SGDbn) 27.8 39.9 46.06Petrochemical output (SGDbn) 17.1 19.9 22.74Specialty chemicals (SGDbn) 5.7 6.6 5.63Source: Singapore Chemical Industry Council, Statistics SingaporeSpeciality Chemicals Speciality chemicals support key growth industries in the manufacturing sector, as they are used in electronic materials, water and process treatment, surfactants, additives (polymer, lubricant and fuel) and resin systems, including pigment, paint and adhesives.© Business Monitor International Ltd Page 14
  16. 16. Singapore Chemicals Report 2009 Of the leading 10 flavours and fragrances companies in the world, nine have operations in Singapore. These include players such as Switzerland-based Givaudan and Firmenich, and UK-based International Flavours and Fragrances (IFF). They have located their creative hubs in Singapore, as it is a strategic location that enables them to keep track of consumer preferences. The speciality chemicals industry recorded an output of SGD6.86bn (US$4.55bn) in 2008. According to the EDB, this segment’s annual output is expected to increase to SGD8bn (US$4.88bn) by 2010. This segment has remained a consistent contributor to growth, despite continued price pressure exacerbated by rising raw material costs. Singapore continues to be an attractive location for speciality companies by offering a ‘total solution’ approach that combines the various aspects of the value chain from service, innovation, technology and manufacturing, to regional distribution and marketing. 2008 saw several major investments in the specialty chemicals sector including Nikko Chemical’s surfactant plant and the proposed LANXESS butyl rubber production plant both located on Jurong island. The government is now also focusing on developing new areas in specialities, which are expected to add to the diversity and strength of this segment. Emerging areas with good potential include digital inks and speciality ingredients. The demand for speciality chemicals from electronics and food manufacturing industries has also been stimulated by regional export orders.Electronic Chemicals The electronic chemicals business segment in Singapore focuses on the semiconductor industry. Electronic chemicals and materials output is forecast to increase to SGD3.5bn (US$2.13bn) by 2010 on the back of high growth in semiconductor and display fabrication industries, where the nation has an advantage in terms of technological innovation. Singapore has 12 operational semiconductor wafer fabrication plants owned by leading players such as Taiwan-based UMC, Switzerland-based STMicroelectronics and Singapore-based Chartered Semiconductor. Within Singapore’s chemicals industry, there has been strong Japanese investment in electronic chemicals and materials. Over the last few years, there have been new investments from leading players such as Nagase, Stella Chemifa and Tama Chemicals, all drawn to Singapore by an emerging liquid crystal display (LCD) industry, as well as the established semiconductor industry. In August 2008 SONY invested SGD150mn (US$105mn) and opened a lithium ion battery plant in Singapore; their first in the South East Asia region. Despite Singapore losing some manufacturing operations to lower cost regions, according to the Microelectronics IC Design and System Association, the country is confident that growth will be seen in the semi-conductor industry throughout 2009. In August 2006, Singapore was home to 10 wafer fabrication plants. These include the world’s leading wafer foundries: UMC, Taiwan Semiconductor Manufacturing Company (TSMC) and Chartered© Business Monitor International Ltd Page 15
  17. 17. Singapore Chemicals Report 2009 Semiconductor. Overall, there has been growing domestic demand for electronic chemicals and materials, and in 2008 SOITEC and Samsung Electronics together with Siltronic each opened wafer fabrication plants in Singapore.Pharmaceuticals Pharmaceuticals are a part of the biomedical segment in Singapore. At the commencement of Singapore’s Bio Medical Sciences (BMS) initiative in mid-2000, the goal was to double the BMS segment’s manufacturing output from US$3.7bn to US$7.4bn by 2005. But robust performance in 2004 enabled the nation to exceed that target by one-third, one year ahead of schedule. In 2008, pharmaceuticals contributed SGD16.67bn (US$11.05bn), or 84.86% to the total BMS manufacturing output. Meanwhile, regulatory changes should help to boost pharmaceutical trade VA Generated By Chemicals Commitment, 2004 throughout the Association of Southeast Precision Asian Nation (ASEAN) region. Enginee- Biomedical Transport Drugmakers in South East Asia will find ring Manuf a- Engi- 9% it easier to get Good Manufacturing cturing neering 23% 8% General Practice (GMP) accreditation after a Manu- f acturing major trade agreement was signed. Industries Upgrading facilities and processes will 3% require considerable investment in the short term, but producers of Chemicals 17% Electronics pharmaceuticals will eventually see a 40% significant upside, both domestically and Source: BMI abroad. This is because consumers, especially those on those low incomes, will increasingly appreciate the quality of medicines made in the region. The Sectoral Mutual Recognition Arrangement for GMP Inspection of Manufacturers of Medicinal Products is designed to remove barriers that impede the trade of pharmaceuticals between ASEAN member states. A countrys drug regulator will approve a drugmakers plant and this certification will be accepted by fellow ASEAN states, thereby reducing a duplication of effort. Full implementation is expected by January 2011.Business Environment In Singapore, approval from the government is not needed for non-residents to start a business (except when establishing banks and financial institutions). Foreign companies are allowed to establish representative offices in Singapore after registration with the Trade Development Board. The government allows 100% foreign ownership of Singaporean companies, although there are exceptions. To facilitate© Business Monitor International Ltd Page 16
  18. 18. Singapore Chemicals Report 2009 the growth of Singapore’s ‘external’ economy, the government has been actively pursuing FTAs with its trading partners. These agreements allow Singapore-based companies to export products at lower or preferential tariff rates to FTA partners. Investment terms are also more liberal, thereby allowing Singaporeans and Singapore-based companies to establish bases in the markets of their FTA partners. Singapore has signed and implemented several FTAs. The agreement with Japan is especially important to the chemicals industry, as it has cut tariffs on 95% of Singapore’s petrochemical and chemical product exports to the country. Singapore-based chemical manufacturers now have better access to the Japanese market, which the government hopes is also likely to encourage more investment on Jurong Island. In May 2006 Singapore was engaged in talks with the EU regarding an FTA to strengthen trade and investment ties. The FTA between Singapore and the US became effective in January 2004. The FTA with the US should enable Singapore’s chemicals industry to realise estimated tariff savings of SGD146mn (US$88mn) by 2010. In response to complaints from businesses, Singapore is pushing for lower operating costs. Companies with pioneer status do not have to pay corporate tax in Singapore. Apart from FTAs, the government of Singapore has also been focusing on tightening its intellectual property (IP) laws, which is a major issue for many chemical and pharmaceutical players. In 2002, the World Economic Forum and the Institute for Management Development ranked Singapore as the leading country in Asia for IP protection. Internationally, Singapore is a member of many IP-related conventions and organisations such as the Paris Convention, Berne Convention, Madrid Protocol, Patent Co-operation Treaty, Budapest Treaty, Agreement on Trade-related aspects of IP rights, and the World Intellectual Property Organisation. Along with the government, the EDB has been the lead agency in developing strategic plans for the chemicals industry and attracting investments. The overall strategy has been largely based on making Singapore’s chemicals industry attractive to multinationals active in all phases of the chemicals process. Excellent government-provided infrastructure, financial incentives and government assistance in the implementation of projects have also been central elements in the government’s investment promotion strategy, along with the FTAs. In addition, the government often assists investors by providing additional investment capital or other financial support to projects. Examples of facilities where the government holds a stake are the chemicals plants of Toshiba, Philips Petroleum, Lonza, SembCorp Utilities and SembCorp Gas. Finally, Singapore’s political stability and business-friendly policies remain important selling points for attracting foreign investment.Projects And Expansions In January 2008 it was reported that Finnish refining and marketing company Neste Oil will be investing SGD $1.2bn (US $800mn) to build an 800,000 tonne per year plant to manufacture© Business Monitor International Ltd Page 17
  19. 19. Singapore Chemicals Report 2009 biofuel. The plant will produce NExBTL, which is thought to be the cleanest renewable diesel, using the company’s proprietary technology and will use palm oil as the main input material. Construction will begin in 2008 in the Tuas Industrial Zone with completion expected by 2010. In February 2008, Nikko Chemicals invested SGD$38.4mn (US$25.4mn) in a new surfactant plant to make ethoxylated surfactants, which would be used in the cosmetic industry. The site is to be built on Jurong Island over 1.2ha and is expected to be operating by 2009, producing 3,000 tonnes in the first two years. In February 2008, as reported by Reuters, Singapore company Keppel Corp signed an agreement with ExxonMobil to supply natural gas to ExxonMobil’s facilities on Jurong Island with supply to commence in 2009. The length of the contract was not publicly disclosed but the value of the contract was reported to be SGD$3bn (US$1.99bn). In February 2008 it was reported that Germany-based LANXESS will invest SGD823mn (US$545mn) in building a production plant on Jurong Island to manufacture 100,000 tonnes per year of butyl rubber. Construction will begin in 2009 and by 2010 supply of the raw material required, Raffinate 1, will be delivered by Shell Eastern Petroleum to the site. It is expected to require more than 200 staff once fully operational. In March 2008 GlaxoSmithKline raised its total investment in Singapore to SGD1.5bn (US$1.0bn) with the launch of a new R&D pilot plant on Jurong Island. This is the latest plant for GSK and aims to improve delivery of medicines to patients. In March 2008 Procter and Gamble opened its first Asian-based perfume manufacturing plant in Singapore. In April 2008 Reuters reported that the BG Group PLC had signed an exclusive 20-year contract to import Liquefied Natural Gas (LNG) into Singapore through Jurong Island’s import terminal. Exclusivity exists up to 3mn tonnes per year and supply will commence in 2012. It is expected that imports for 2012 will be between 0.8-1.2mn tonnes per year with capacity increasing to 3mn tonnes per year by 2018. It is hoped that the import terminal will be expanded to accept quantities of 6mn tonnes per year and even 10mn tonnes per year by the mid 2020s. In June 2008 Reuters reported that Singapore firm Rotary Engineering had obtained contracts with a value of SGD102mn (US$67.6mn) from Germany company Oiltanking Group. The projects include construction of a chemical storage facility on Jurong Island and providing a clean petroleum products facility also based in Singapore.© Business Monitor International Ltd Page 18
  20. 20. Singapore Chemicals Report 2009 In June 2008 Samsung and Sitronic opened a SGD1.36bn (US$0.9bn) 300mm silicon wafer factory in Singapore. The factory, which began production in June 2008, should have the capacity to produce 300,000 wafers each month by 2010, making it one of the largest wafer factories in the world. In June 2008 Reuters reported that Gaz de France will take 30% in a joint venture with Singapore Power to construct and run an import terminal for Liquefied Natural Gas (LNG) on Jurong Island. Though neither company commented on the cost, the minister of trade estimated a required amount of SGD1bn (US$0.66bn). Construction on the terminal, to include loading and storage facilities, should begin in 2009. In August 2008 Sony’s lithium ion battery manufacturing plant opened, which represents a SGD150mn (US$99.4mn) investment. The plant is located in Tuas where Sony’s existing plant is, and the new facility occupies 109,600m2. Expected output for the plant by 2010 is around 8mn cells each month accounting for more than 10% of the total out of lithium ion batteries by Sony. In November 2008 Norway company Renewable Energy Corp announced investment levels SGD6.3bn (US$4.18bn) in the construction of a complex in Singapore designed for solar manufacturing. In October 2008 it is reported that Japanese firm Kanto Kagaku, which makes specialty chemicals, began construction on a SGD30mn (US$19.9mn) manufacturing plant and laboratory based in Tuas. Operations are expected to begin in the last quarter of 2009 when production of highly purified chemicals will begin. In November 2008 Soitec launched their 300mm Silicon wafer manufacturing facility in Singapore’s Pasir Ris Wafer Fab Park. Spanning over 2.7ha and employing 100 staff, Soitec are set to invest up to SGD700m (US$464) in Singapore in order to achieve a production capability of up to 1mn wafers a year. In November 2008 Lucite International’s new methyl methacrylate (MMA) plant located on Jurong island began operating ahead of schedule and is expected to produce 120,000 tonnes per year. In November 2008 Katoen Natie, the Belgian Logistics company, announced plans to invest SGD60mn (US$39.8mn) in an expansion of their storage and logistics terminals located on Jurong Island. This move would create 300 jobs as well as increasing their storage and handling© Business Monitor International Ltd Page 19
  21. 21. Singapore Chemicals Report 2009 capacity twofold. The expansion is earmarked for completion by June 2009 with plans to invest a further SGD180m (US$119.5mn) in similar Singapore expansions over the next five years. In December 2008 plans to expand Jurong International Business Park were revealed to include a five hectare development resulting in 125,000m2 of area available to rent. Space is expected to be available for lease by 2011. In March 2009, SPRING announced a SGD1mn (US$0.66mn) budget to work with the SCIC and offer support, workshops and information for chemical companies that are required to become compliant under the EU REACH legislation. In April 2009 it was announced that construction on the Jurong Island Rock Cavern storage facility for 1.47m3 of oil will begin by the end of 2009. It is expected to cost SGD890mn (US590mn) and will be constructed by Hyundai. In April 2009 it has been reported that European major Royal Dutch Shell has shut in a 33,000 barrels per day (b/d) residue catalytic cracking unit at its refinery in Singapore. The long residue catalytic cracking (LRCC) unit is a gasoline-making unit in the refining complex on Bukom Island. Shell has said that it expects the facility to restart its operations on April 21 2009.Earlier Developments In November 2007, it was reported that Mitsui Chemicals Inc would invest approximately SGD230mn (US$153.1mn) to establish a new plant on Jurong Island. Managed by Mitsui Elastomers Singapore, the new facility will build on the companys previous investment in 2003 to produce TAFMER™. In October 2007, Exxonmobil decided to set up its second world-scale steam cracking complex in Singapore. Scheduled to start up in 2011, the new chemical complex will feature the latest, state-of-the-art proprietary technologies. The project will be located at and fully integrated with the companys existing site on Jurong Island, providing feedstock, operating and investment synergies with both the chemical plant and refinery. The new complex will provide increased flexibility to meet customers needs by processing a broad range of feedstocks and converting them into high-value products, such as new metallocene-based Vistamaxx™ specialty elastomers, Exceed™ polyethylene resins and Exact® plastomers. In September 2007, it was reported that, for the first time, the Chinese integrated energy and chemical company, SINOPEC, also known as the China Petroleum and Chemical Corporation, would have its range of lubricant oils produced in Singapore. The first barrel of© Business Monitor International Ltd Page 20
  22. 22. Singapore Chemicals Report 2009 SINOPEC lubricant oil was released in June 2007, and marked the start of Singapore and SINOPECs collaboration to provide the latter’s products to consumers in the Asia-Pacific region. In August 2007, RohMax Additives GmBH, part of specialty chemicals leader Degussa, extended its presence in Singapore by building its first facility in the Asia-Pacific region to manufacture high performance lubricant additives on Jurong Island. The facility, built with an investment of SGD20.7mn (US$13.4mn) and expected to open in 2008, will be one of the largest of its kind globally. The new facility is expected to produce most of the VISCOPLEX®, the companys brand of high-performance lubricant additives for use in automotive and industrial applications, which will cater to the needs of the Asia-Pacific, Middle East and African markets. In July 2007, Tate and Lyle opened their SPLENDA® Sucralose facility in Singapore. The SGD300mn (US$196.1mn) facility also represents the companys largest investment in Asia. The new plant will broaden their manufacturing base and help facilitate improved access to the Asian and European markets. In July 2007, BASF announced the setting up of a new Competence Centre for Organic Electronics in Singapore. This SGD4mn (US$2.6mn) investment represents the second part of its plan to expand its research activities in the Asia-Pacific region, which already includes a new project on organic photovoltaics with the Institute of Materials Research and Engineering (IMRE). In June 2007, Chemical Specialties (Singapore) Pte Ltd (CSL) announced the setting up of a specialty chemical contract manufacturing facility in Singapore. Located on Jurong Island, phase one of the project will have three 85MeT capacity reactors and a 115MeT batch distillation unit while the completed facility will eventually house more than 20 reactors ranging in capacity from 20MeT to 200MeT. In June 2007, Riken Vitamin Co. Ltd, a key global player in the specialty ingredients industry announced the opening of its new application centre. Riken Vitamins new centre is expected to be the base to innovate and develop new products and applications for its customers outside Japan. The application centre will possess the companys core molecular distillation technology and, as such, will have top-of-the-line manufacturing capabilities to service its worldwide clients. In June 2007, British global pharmaceutical giant GlaxoSmithKline (GSK) announced the opening of its new SGD20mn (US$13.2mn) medicinal chemistry laboratory at its R&D facility in the local biomedical hub, Biopolis. This new flexi-laboratory enables researchers to adopt a© Business Monitor International Ltd Page 21
  23. 23. Singapore Chemicals Report 2009 cutting-edge collaborative approach that combines both biology and chemistry research in the same place. In June 2007 , it was reported that Denka increased its substantial presence in Singapore with two new plants – one in Tuas and the other on Jurong Island – worth SGD120mn (US$78.9mn). With the two new plants boasting some of the worlds most high-tech production facilities, Singapore now has the distinction of being Denkas third largest production base. In February 2007 it was reported that Petrochemical Corporation of Singapore (PCS) and Shell Eastern Petroleum (Pte) Ltd had opened a new metathesis plant. The new SGD$80mn (US$52.2mn) metathesis plant is expected to produce up to 200,000 tonnes per year of propylene, in addition to the 650,000 tonnes per year produced currently by its two operational naphtha crackers. In January 2007 it was reported that Natural Fuel, a global group of renewable energy companies headquartered in Western Australia, announced that they have chosen Singapore as the site for their SGD$199.95mn (US$130mn) state-of-the-art biodiesel production facility. Expected to be the largest biodiesel facility in the world, it is currently under construction on Jurong Island, and was scheduled to begin production by the end of 2007. In January 2007 it was reported that Davos Life Science, manufacturer of active ingredients for health supplements, cosmeceuticals, functional foods, animal health and pharmaceutical produced based on natural tocotrienols, had opened the world’s largest R&D centre dedicated to tocotrienols, in Singapore. In January 2007 it was reported that Mitsubishi Chemical Infonics Pte Ltd, one of the worlds leading producers of Organic Photo Conductor (OPC) drums, had opened its fourth manufacturing line within its expanded plant on Jurong. In November 2006, Japan’s Mitsui Chemicals unveiled plans to open its first R&D centre outside Japan. The centre will be housed at the Agency of Science, Technology and Researchs (A*STAR) Institute of Chemical & Engineering Sciences (ICES), and will focus on the areas of catalysis and asymmetric synthesis, two areas which Mitsui and ICES have joint research experience as a result of their collaboration in 2004.© Business Monitor International Ltd Page 22
  24. 24. Singapore Chemicals Report 2009Industry Forecast Scenario Singapore has experienced strong development recently in the chemical industry and 2007 was a record year for manufacturing investment as a whole. Despite the economic downturn and planned maintenance closures affecting production levels in 2008, Singapore still managed to attract notable investments within the sector. One of the attractions to investors is the integrated industry opportunities offered at Jurong Island and proposed developments to the area should ensure that Singapore is still an attractive location for chemical companies. Improvements include development of the jetty to accelerate loading and unloading turnover, the development of the Jurong Island Rock Cavern to extend storage, and the development of leasable business space. While these developments keep Singapore’s chemicals industry competitive, there are several factors that could limit Singapore’s success in the future. Increased instability in Malaysia or Indonesia could result in reduced economic growth within the region, negatively affecting demand for petrochemicals, fine and speciality chemicals, possibly leading to a decline in foreign investment. The country has targeted a manufacturing output of US$300bn by 2018, with the majority being contributed by the chemicals industry. It is anticipated that petrochemical and downstream investments in Jurong Island will help the government to achieve this objective. Thus far, Singapore has been progressing in the petroleum refining and petrochemicals sector despite its lack of indigenous resources, and in 2008 Singapore launched initiatives to improve its independence from Indonesia and Malaysia for importing materials, particularly liquefied natural gas. However, Singapore could still experience a threat from resource-rich countries such as Indonesia and Malaysia, where there are indigenous hydrocarbon feedstock resources and low production costs for petrochemicals. If these countries improve their support infrastructure and, in the case of Indonesia, address political stability concerns, they may attract business that might otherwise go to Singapore. Similarly, diversification from oil to petrochemicals in Middle Eastern economies may provide new competition for Singapore. China and India also continue to increase their capabilities within this sector and this may influence Singapore’s position in the chemicals industry. Singapore looks set to continue making investments in R&D projects and it is hoped that coupled with extensive IP resources, Singapore will remain attractive for companies looking to not only research but also implement new technologies. Though the economic downturn and weaker demand is expected to affect manufacturing levels and immediate investment, Singapore will continue with long-term expansion goals to establish itself as a significant figure in the global chemical industry.© Business Monitor International Ltd Page 23
  25. 25. Singapore Chemicals Report 2009 Singapore has received significant investment in renewable energy from key companies. However, should the government remain resistant to clean energy subsidies these companies will be unable to offer competitiveness in price, which could affect the performance of this sector. The introduction of the EU REACH legislation is expected to be one of the biggest obstacles in the future of the Singapore chemical industry and failure to educate the chemical companies on compliance could result in a decrease of export levels to the EU, which account for a significant proportion of Singapore’s EU exports.Table: Singapore’s Chemicals Industry, 1993-2012 (SGDmn)Year Imports Exports Domestic exports Manufacturing output Total output1993 9,614.94 7,662.84 4,463.98 5,154.4 5,387.41994 10,113.64 8,418.01 4,695.63 5,918.7 6,203.01995 11,385.11 9,999.27 5,621.24 6,865.1 7,177.41996 10,939.52 9,885.26 5,626.23 7,163.1 7,489.11997 11,267.85 11,135.60 6,650.00 9,339.0 9,707.01998 10,280.37 11,832.30 7,163.22 10,156.7 10,508.21999 11,212.44 15,325.70 10,392.59 13,869.9 14,370.22000 13,282.47 16,488.00 10,718.00 15,943.8 16,406.22001 12,181.34 17,632.00 12,059.33 15,791.8 16,767.82002 12,990.03 20,817.00 15,283.00 21,430.5 22,451.02003 15,381.00 32,196.00 25,169.00 26,489.00 27,994.42004 18,404.00 38,947.00 30,923.00 28,974.50 30,985.592005 20,744.00 43,611.00 34,526.00 31,627.70 34,104.152006 22,695.00 49,070.00 39,544.00 34,390.83 37,313.322007 24,510.60 52,014.20 42,521.20 37,226.02 40,586.962008 25,981.23 54,614.91 43,597.26 40,108.43 43,906.452009f 23,619.30 49,649.92 39,633.87 36,462.21 39,914.952010f 24,445.98 51,387.67 41,021.06 35,747.26 39,132.312011f 26,890.57 56,526.43 45,123.16 49,273.72 41,754.1732012f 29,579.63 62,179.08 49,635.48 52,529.88 44,551.70f = forecast. Source: BMI© Business Monitor International Ltd Page 24
  26. 26. Singapore Chemicals Report 2009 For 2008, chemicals industry imports are estimated at SGD25.9bn (US$17.38bn). However, there is forecast to be a sharp drop in 2009 due to falling demand, with the market recovering from 2010. The value of exports for 2008 is forecast to be SGD54.6bn (US$36.6bn). Again the export market is expected to be hit hard in 2009 as orders from overseas dry up. The manufacturing output for chemicals is also forecast to suffer a contraction in 2009 as domestic GDP slumps. Recovery will not begin in earnest until 2011 as the country is suffering severe export declines across most sectors.Macroeconomic Forecast Full Effects Of Recession To Be Felt In H109 Advance estimates by Singapores Ministry of Trade and Industry (MTI) showed that the economy is feeling the full brunt of the global slowdown. Almost all sectors of the economy remained weak with the exception of the construction sector. We are maintaining our bearish -7.2% GDP forecast for 2009 as we do not foresee any positive catalyst over the medium term that may boost economic output. This is roughly in line with MTIs most recent GDP projections of a contraction of between 6.0-9.0% this year. The first quarter of 2009 was characterised by economic contraction across much of the world as the full brunt of the global recession started to hit the real economy. Asia - which in general has a high dependence on exports - has been severely affected by falling demand for its goods in the US and Europe. Singapore, which relies heavily on trade to fuel GDP growth (total exports amount to more than 200% of GDP), has been one of the worst affected by the global recession. Indeed, advance estimates by the Ministry of Trade and Industry (MTI) indicated that Singapores GDP shrank by a massive 11.5% y-o-y in Q109, far worse than the 4.2% contraction registered in Q408. On a seasonally-adjusted annualised basis, GDP shrank by 19.7% quarter-on-quarter (q-o-q) in Q109, compared with a contraction of 16.4% in the preceding quarter, indicating a further deceleration of economic activity going into 2009. These poor figures are not surprising as we have been decidedly bearish on the global economy and have maintained that Singapores economy will under-perform its regional peers in 2009. We recently lowered our outlook for the global economy, forecasting global growth to come in at -2.3% in 2009 (in US dollar nominal GDP-weighted terms) as we took into account the negative economic data that have been released this year. Importantly, we are anticipating GDP to shrink by 3.3% and 3.6% in the US and the Eurozone (key export destinations for Singapore), respectively, and this is also reflected in our dismal outlook for Singapores economy in 2009. We are projecting the city-states GDP to shrink by 7.2% this year. Meanwhile, the government has also revised down its projections for GDP growth. It now envisages a contraction of between 6.0-9.0%, which is markedly worse than its previous estimate of a contraction of between 2.0-5.0%. Thus, the governments new forecast is roughly in line with our own.© Business Monitor International Ltd Page 25
  27. 27. Singapore Chemicals Report 2009 The slowdown in Q109 was broad based, with declines seen in most sectors. The manufacturing industry remained weak, with output falling by 29.0% y-o-y, highlighting the decidedly bad performance thus far this year. The figure is much worse than the 10.7% decline in output registered in Q408, indicating a severe reaction from manufacturing firms in response to a sudden falloff in demand, following the financial meltdown over the same period. Within the segment, the electronics and precision engineering components continue to be the worst performers. Given our poor outlook for Singapores main trading partners, we do not foresee this sector recovering in 2009, although we do expect the rate of decline in manufacturing output to begin moderating in the coming quarters. Meanwhile, construction output remained surprisingly robust, growing at 25.6% y-o-y in Q109. The figure was an improvement over the 18.5% increase registered in Q408, possibly on the back of an existing backlog of orders. However, we also expect growth rates in this sector to fall over 2009 as new projects become less forthcoming. We were concerned about Singapores services sector despite it holding up relatively well in Q408, and our worries were well founded as the islands services output fell by 5.9% in Q109, compared with a contraction of 1.3% in the preceding quarter. The wholesale and retail trade sector, and the transport and storage sector, were the worst hit. However, this is to be expected given the onslaught of poor export data, container shipments and retail sales numbers that were released earlier. Going forward, we do not expect the external sector to recover significantly in 2009. Likewise, we envisage falling tourist arrivals and lower private consumption to continue to drag on retail sales. With no clear catalyst in sight to boost the services sector, we expect it to perform poorly in 2009. GDP Breakdown Highlights Vulnerabilities Breaking down Singapores GDP into its component parts, we can see that the external sector plays a very large role in its economy. Indeed, the net export component makes up about 20% of Singapores GDP, while gross fixed capital formation - which remains highly vulnerable to the state of the global economy - makes up close to 30%. Therefore, we would expect Singapores GDP to be dragged down in line with the global contraction. Singapores non-oil domestic exports (NODX) fell by 17% y-o-y in March, a continued improvement from the 23% drop in the preceding month. This suggests that Januarys massive 34% decline in exports may have been a trough. Total exports and imports have also started to stabilise, falling by 21% and 28%, respectively, in March, as opposed to 24% and 20% in February. Likewise, these figures are markedly better when compared with the sharp drops registered in January. Meanwhile, total trade fell by 24.0% in March. While the figures suggest that the declines in trade could be less marked going forward, we reiterate that exports are likely to remain dismal in the coming months and thus continue to drag on the city states export-oriented economy. Electronics as well as petrochemical exports, which form a large part of Singapores total exports, remain weak. Furthermore, exports to most of the islands key trading partners saw double-digit declines, with the© Business Monitor International Ltd Page 26
  28. 28. Singapore Chemicals Report 2009 notable exception of China. Shipments to China rose by 14% y-o-y in March, following an 8% increase in February, suggesting that a positive and improving trend may be emerging. This indicates that the CNY4trn (US$585bn) stimulus package announced by Beijing last year may have begun to take effect. However, it must be noted that while we are anticipating Chinas economy to outperform the major economies in 2009, our outlook for the bulk of the global economy is far from sanguine. To be sure, we are still very bearish towards the US, Europe and Japan, which have been the biggest drags on Singapores exports. Indeed, while the rise in exports to China is encouraging, we highlight that China alone will not be able to pull Singapore out of its economic slump. The island has a gigantic trade-to-GDP ratio at more than 3:1; and, unless a sustained recovery in the global economy is seen, Singapore will continue to under-perform its regional peers. We are currently projecting the global economy to contract by 2.3% this year and the impact of shrinking external demand will be amplified in Singapores case. Indeed, we have recently revised down our trade outlook for Singapore for 2009. We are now anticipating total exports to fall by 16.0%, while total imports are forecast to decline by 15.5%. These figures are based on the assumption that the decline in trade will moderate from the sharp drops seen in late 2008/early 2009 in the coming months. Domestic Demand To Falter Domestic demand will be curtailed in the coming quarters as consumers cut back on discretionary spending amid rising concerns about the economy. This is reflected in the poor retail sales figures in recent months. As such, we are expecting private consumption to fall by 2.5% this year, thereby contributing close to one percentage point (pp) of decline in GDP for 2009. Similarly, we expect gross fixed capital formation to decline by 7.5% as investments start to dry up in anticipation of further slowdowns in demand. This would drag down GDP by slightly over 2pps. Government consumption should remain robust, growing by about 8.0% as the government took the extraordinary step of dipping into reserves to reduce the impact of this downturn. This may boost GDP by close to 1pp. In spite of the SGD20.5bn (US$14bn) resilience package aimed at helping companies and individuals through the current economic downturn, it must be noted that it is neither the governments intention or within its ability to spend its way out of Singapores recession. Instead, the budget is aimed at helping companies retain employment. This is seen as a cushioning measure rather than the cure for the downturn. Given Singapores dependence on the external sector, it is not surprising that the biggest drag on GDP will be the fall in net exports. The decline in net exports will contribute more than 5pps of the -7.2% decline we are forecasting for the islands economic output. As such, with limited domestic demand growth potential, Singapore will have to weather the global downturn this year and rely upon a recovery in the global economy in 2010 before achieving stable economic growth again.© Business Monitor International Ltd Page 27
  29. 29. Singapore Chemicals Report 2009Table: Singapore – Economic Activity, 2006-2013 2006 2007 2008 2009f 2010f 2011f 2012f 2013f 1Nominal GDP, SGDbn 221.1 251.6 257.4 238.0 243.8 256.2 273.1 289.8 1Nominal GDP, US$bn 139.70 168.10 174.26 150.04 146.77 155.59 166.68 179.04Real GDP growth, % 1change y-o-y 8.2 7.7 1.1 -7.2 1.3 2.3 3.6 3.8Nominal GDP per capita, 1US$ 31,190 36,416 38,811 33,035 31,961 33,533 35,570 37,859 2Population, mn 4.40 4.59 4.84 4.89 4.95 5.00 5.06 5.11Manufacturing production 1index, % y-o-y, average 14.1 7.2 6.0 -2.1 -3.4 3.3 4.7 5.2Unemployment, % oflabour force, end of 3,7period 2.7 2.3 2.4e 3.3 3.1 2.9 2.7 2.4 1 2 3e/f = BMI estimate/forecast. Source: Statistics Singapore, IMF, BMI; Statistics Singapore, BMI; Ministry ofManpower, BMI© Business Monitor International Ltd Page 28
  30. 30. Singapore Chemicals Report 2009Company MonitorEastman Chemicals Singapore Eastman Chemicals is a Fortune 500 company that manufactures and Address Eastman Chemicals Singapore markets chemicals, fibres and plastics worldwide. It provides key Limited differentiated coatings, adhesives and speciality plastics products. It No. 05-04 Winsland House 1 3 Killiney Road is the world’s largest producer of polyethylene terephthalate (PET) Singapore 239519 polymers for packaging, and is a major supplier of cellulose acetate Tel: +65-6831-3100 fibres. Fax: +65-6732-4930 Web: www.eastman.com Eastman has 11 manufacturing sites in seven countries that supply chemicals, fibres and plastics products to customers throughout the Key Statistics 2008 Global net sales: US$6.7bn world. Eastman Chemicals’ oxo chemicals complex is located on Net pperating profit : US$1.1bn Jurong Island. Asia pacific sales: US$1.18bn. Key Personnel The company has a US$200mn complex that includes a 150,000 Manager, Asia Pacific, logistics tonnes per year oxo aldehydes plant, plants for 2-ethylhexanol and n- operations and supply chain butanol, and plants for three speciality oxo products sold primarily to performance; chemicals and intermediaries: Capt. Raymond the resins, coatings and vinyl compounding markets: neopentyl- Heman glycol (NPG glycol), Texanol ester-alcohol, and TXIB plasticiser. Customer supply chain manager: Tom Morton General manager, Singapore Product Portfolio manufacturing: Mani Lakshmanan The company’s product portfolio includes NPG glycol, TXIB plasticiser, oxo aldehydes, oxo alcohols, 2-ethylhexanol, Texanol ester-alcohol, among others. In Eastman’s oxo process, olefins such as ethylene or propylene are reacted with syngas – a combination of carbon monoxide and hydrogen – to produce oxo aldehydes, which are then processed further to yield oxo alcohols and other products. Sold to industrial customers, these products are used in drug and pharmaceutical manufacturing, food and beverage containers, coatings, paints, inks, varnishes and lacquers, cosmetics and perfumes, automotive fluids, herbicides and pesticides and vinyl products.© Business Monitor International Ltd Page 29
  31. 31. Singapore Chemicals Report 2009 Financial Highlights In 2008 Eastman achieved global sales of US$6.7bn with a gross profit of US$1.1bn. The sales revenue for the Asia Pacific region amounted to US$1.18bn. This was an increase of 8% on 2007. This increase was largely attributed to the higher cost of raw materials and energy resulting in higher selling costs.© Business Monitor International Ltd Page 30
  32. 32. Singapore Chemicals Report 2009 ExxonMobil Chemicals With petrochemical manufacturing and marketing operations in Address 1 Harbour Front Place 06-00, more than 150 countries around the world, ExxonMobil Chemicals is Harbour Front Tower One, a global player in technology, product quality and customer services. Singapore 098633 Its products include olefins, aromatics, fluids, synthetic rubber, PE, Tel: (65) 6885 8000 PP, oriented polypropylene packaging films, plasticisers, synthetic Fax: (65) 6885 8405 lubricant base stocks and additives for fuels and lubricants. Web: www.exxonmobilchemicals.com The Singapore Chemicals Plant (SCP) is ExxonMobil Chemicals’ Key Statistics 2008 (Global) single largest investment (US$2bn) in the Asia-Pacific. Comprising Revenue: US$459.579bn five integrated units, this facility serves as a strategic supplier for Net income: US$45.220bn ExxonMobil’s global shipping network. Key Personnel Chairman/CEO: Rex W Tillerson In January 2006, ExxonMobil Asia-Pacific awarded a project co- Executive vice-president: ordination and services contract to a team of Foster Wheeler and Stephen D. Pryor Worley Parsons for a potential project at its Singapore plant site. The Director: William R. Howell project is named Singapore Parallel Train (SPT). In August 2006, Asia Pacific manufacturing director: Jeffery W Davis ExxonMobil Asia Pacific authorised Foster Wheeler to start the early phase of design work for the SPT. In March 2007, ExxonMobil Chemical announced the successful completion of the expansion of its steam cracker in Singapore. The expansion project, announced in 2005, has increased the ethylene capacity of the world-scale Singapore Chemical Plant by 75,000 tonnes per year to more than 900,000 tonnes per year. In June 2007, the company announced that it will add 130,000 tonnes per year of capacity to its Exxsol™ hydrocarbon fluids plant on Jurong Island. This will bring Singapore fluids production to more than 500,000 tonnes per year. Commercial quantities of the product from the new facility are expected to be available in the fourth quarter of 2008. In February 2008 Singapore’s Keppel Corp signed an agreement with ExxonMobil to supply natural gas to ExxonMobil’s facilities on Jurong Island with supply to commence in 2009. The length of the contract was not publicly disclosed but the value of the contract was© Business Monitor International Ltd Page 31
  33. 33. Singapore Chemicals Report 2009 reported to be SGD$3bn (US$1.99mn) In August 2008 Exxonmobil opened a Dormitories and Safety Training Centre located at its petrochemical project on Juron Island. Financial Highlights The company reported net income (global) of US$459.579bn in 2006, and revenue (global) was reported at US$45.220bn. This was record earnings for the company, which displayed robust performance across all of its business sectors.© Business Monitor International Ltd Page 32

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