Taiwan's only publicly traded oil refiner Formosa Petrochemical Corp., could post the smallest profit growth in more than a year due to soaring crude oil prices, falling petrochemical prices, and competition with state-run Chinese Petroleum Corp.
Taiwan's average per barrel cost of importing crude oil soared 34% from a year earlier in H1-2005. Rising feedstock prices are not being passed on to product prices. Taiwan's spot ethylene prices fell about 18% during Q2. The spread is narrower between raw materials and product prices. Oil products accounted for 68% of sales and petrochemicals accounted for 24%. The company's refining margin, the difference between oil product prices and crude oil costs, was about US$7 a barrel in Q2, down from an average of US$9.5 a barrel in Q1. Squeezed earnings could result in Q2 net income to record the slowest pace since Q1-2004, when profit fell 0.2%. Formosa Petrochemical's Q2 sales recorded a 34% growth from a year ago levels, to NT$103.7 billion.
Chinese Petroleum controls about 70% of Taiwan's gasoline and diesel markets, while the balance market share is with Formosa Petrochemical. If Chinese Petroleum does not, then Formosa Petrochemical is not in a position to raise oil product prices due to a government policy. The Government refused to lend support to Chinese Petroleum raising oil product prices further after the NT$1.5 a litre increase in gasoline and diesel costs on August 2.
29-Aug-05 
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