Thailand's SCG Chemicals, a major petrochemical producer in Asia-Pacific region, expects its sales revenue to further rise by 25% in 2008 and that too after lowering the ethylene cracker production by 10%. Ethylene production was cut back to balance the impact of soaring feedstock prices. The rise in sales revenue is due to the rising petrochemical prices in the past few months, in line with record high oil prices. However, the rising fuel and material cost will result in squeezed margins. The time lag in the increase in prices of downstream products relative to rising feedstock cost has led the chemical business of SCG to a 10% production cut at the ethylene cracker.
The company now focuses on developing high value added products and supplying to local and overseas market, along with cost reduction to curtail the impact of higher input costs. As a result, SCG Performance Chemicals Co - a wholly owned subsidiary was initiated early this month to distribute high value added products in four categories: wire and cable, rotomolding, polyethylene (PE) wax and oversized gas and water pipes. By 2013, this product line is expected to garner 30% of the total revenue of SCG Chemicals by then amounting to 25 bln baht in sales. This year, SCG Performance Chemicals intends to secure revenue of 8.7 bln baht, 70% of which will come from exports. SCG Chemical's main markets are Oceania, Asia and Europe. Also, it plans to 1.5 billion baht in research and development for capacity expansion of its high value-added products in five years. Rayong Olefins, another SCG subsidiary, would spend 1.3 billion baht over a five-year period starting this year to cut energy expenses by two billion baht from now until 2013.
As far as the overseas investment goes, a high-density polyethylene (HDPE) project in Iran is delayed by one year to early 2009 due to a stay in infrastructure development, including utilities and gas pipelines. Also, SCG Chemicals anticipates to receive a licence for a US$4 bln petrochemical complex in Vietnam this year to initiate construction in early 2009. The complex is scheduled to begin production of PVC-related products in 2011 and olefins in 2013.
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