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Asian Petroleum Review : Jan-March 2011
Singapore's aim to rule Asia's expanding specialty chemicals market will be chal- lenged with China set to boost capacity and reduce imports, leaving the island with lim- ited export options. Unable to vie head-on with China and the Middle East on commoditised petrochemicals, Singa- pore is moving up the value chain to snare a siz- able portion of the $395 billion global specialty chemicals market. Specialty chemicals - - high-value raw materials used to produce a host of consumer products from high-performance tyres to state-of-the-art LCD televisions - - is a growing market for petro- chemical makers striving for higher profit mar- gins and to differentiate themselves from com- petitors. The island nation needs to carve a niche for itself in that segment to stay ahead of China. "Singapore has no choice but to keep moving into more advanced chemicals with higher mar- gins, " said Chris McNally, a partner with man- agement consultants Booz & Company in China. "It has to run faster just to stand still." Singapore's 10-year masterplan, dubbed Jurong Island Version 2.0, aims to further boost its en- ergy and chemicals industry, valued at S$57 bil- lion ($44.2 billion), which contributed 28 percent of the economy's manufacturing output last year. The city-state has had a headstart over China on spe- cialty chemicals, but lags the Asian giant as a consumer manufacturing hub, and lacks its critical mass. This makes it dependent on export markets, and unless it finds new outlets outside Asia, it may struggle as China becomes increasingly self-reliant. "While developed countries still corner nearly 59 percent of the specialty chemicals market, the growth in the U.S. and Europe is just 2-3 percent compared to Asia at 10-15 percent, " said Krithika Tyagarajan, research director for chemicals, material, food practise, Asia Pacific at Frost & Sullivan. She added growth will be driven by India, Southeast Asian countries and especially China, where the econ- omy has been expanding at double digits driven by the manufacturing sector. SEEK NEW MARKETS "A key question in the industry is how fast China will move to satisfying its own demand in fine and specialty chemicals, " said McNally of Booz & Company in China. It took China 12 to 15 years to do that for basic chemi- cals, such as ethylene and low-end polymers, but will probably take a little longer for specialties, he said. China's development of its specialty chemicals capabili- ties means Singapore has a window of perhaps 15 years before it gets partially shut out of its top export market, analysts said. Singapore's chemical ambitions face Chinese threat By Francis Kan and Seng Li Peng SINGAPORE