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Asia, with more than 40% share of human population,
provides a huge, growing market. Compared to the developed regions
of North America and Europe, the Asian chemical markets have already
become big. The estimated value of the Asian chemical consumption
is about US$ 500 billion/year. The Asian region produces almost
$260 billion worth chemicals; the remaining is imported from USA,
Europe and Middle East.
There is a huge potential demand, as most of the
consumption in this region is below the global average. With higher
GDP growth, countries in the Asian region are gradually improving
their standards of living. Their chemical demand will continue to
grow at a higher pace in this decade. During the recently held meeting
of the Asia Plastics and Chemical Industries at Singapore, leading
experts were very optimistic about the growth in this decade. Most
of the experts agreed that the Asian region will grow much faster
and will account for almost half of the global chemical volume by
2010 from the existing 33%. It is expected that the Asian region
would account for almost US$1 trillion out of the total US$2.6 trillion
global business by 2010. China is expected to consume more than
31 million tonnes of polymers by 2010, folowed by India, which is
expected to cross over 10 million tonnes of polymer consumption
by 2010.
To meet the increasing demand, Asian countries, particularly China,
Singapore and India are likely to become the major production centers
in Asia. The Middle East region, with its abundant supply of the
oil, will also increasingly invest in the downstream petrochemical
industry.
All leading global multinationals are considering investments in
Asia to take advantage of the expected demand growths. Some of them
like Exxon Mobil and BP have already made investments. BASF, Dow,
Shell and many others have major plans for large investments. Some
of them like Chevron-Phillips and Borealis have already made investments
in the Middle East region to market their products in the Asian
region.
Particularly in China, increasing lending appetite by domestic
banks in US dollars and Chinese renminbi, similar to offshore lenders,
and their low all-in cost, have enabled them to price-out offshore
lenders in domestic projects," Gardner said. Petrochemical
financing in China is poised to become a booming investment sector,
with over $15-bil worth of potential new deals on the drawing boards,
Gardner said. This included the $4-bil integrated petrochemical
project in Nanhai being planned between CNOCC and Shell.
Another project in Asia which is currently being discussed is the
Trans-Pacific Petrochemical Indotama project at Tuban, Indonesia.
The financing for this $400-mil aromatics complex, stalled in 1998,
is currently being re-negotiated, Gardner said. SMBC is the lead
arranger in the project. However, recovery may be a long-drawn process.
"Large size of debt, large number of creditors and unrealistic
expectations had lead to protracted negotiations," Gardner
said. "More shake-up in Asia is possible if product prices
do not recover," Gardner noted.
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