Siam Cement expects surge in demand for petrochemicals in Asia

31-Jan-14

Thailand's biggest cement producer, Siam Cement PCL, expects a surge in demand for petrochemicals in Asia to save it this year from the fallout of a domestic political crisis that has crimped demand for its core products, as per Reuters. Siam Cement is Southeast Asia's biggest producer of downstream chemicals for plastics and the region's second-largest cement producer. It forecast growth in cement demand this year to fall below the 7% recorded in 2013 but petrochemicals demand is seen rising to drive overall growth. "The outlook of petrochemicals will be good this year as demand has improved in line with the global economic recovery," Chief Executive Kan Trakulhoon said on Thursday, without specifying a figure. The weak baht will be positive for our petrochemicals exports, but we may be affected by rising fuel costs," he added. Bangkok has been gripped by anti-government protests since November which have weakened the baht currency to near four-year-lows against the US dollar and hurt tourism as well as domestic demand. The central bank last week cut its forecast for economic growth this year to about 3% from an earlier projection of 4%. The petrochemicals unit accounts for about 27% of Siam Cement's earnings, and robust demand from Asia for plastics, used in everything from car making to consumer goods to construction, has helped boost margins for producers. The company's core cement business saw EBITDA increase 27% year-on-year- growing only 2% since the beginning of this year, versus a 6% growth inQ4-2013. In case of continuation of the ongoing political crisis, cement demand from public investments is likely to be negative. This should drag down the overall growth. The company was hit by a foreign exchange loss of 600 million baht in 2013 due to hedging. Domestic cement demand is expected to decelerate at 3-4% in 2014 after construction activities were put on hold and the government delayed infrastructure spending as protests aimed at toppling Prime Minister escalate.