p127-39 - Engineering Plastics in Sea-updated1

8/13/2019 p127-39 - Engineering Plastics in Sea-updated1

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Engineering Plastics Market in

Southeast Asia

P127-39

January 2008

2008 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it maybe circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.


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2 2008 Frost & Sullivan, All rights reserved www.frost.com#P127-39

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4/1694 2008 Frost & Sullivan, All rights reserved www.frost.com#P127-39

Table of Contents

Executive Summary 5

Total Southeast Asia Engineering Plastics Market 13

Singapore Engineering Plastics Market 36

Malaysia Engineering Plastics Market 79

Thailand Engineering Plastics Market 124

Database of Key Industry Participants 167


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Executive Summary



Executive Summary

Engineering plastics are high-end polymers, usually ranked between standard commodityplastics and advanced engineering polymers. There are five main types of engineeringplastics that are focused in this research service. They are:

Polyamide (PA)

Polycarbonate (PC)

Polyoxymethylene (POM)

Polybutylene terephthalate (PBT)

Others, polystyrene (PS), polyphenylene oxide (PPO), and polymethylmethacrylate

(PMMA)

This research service presents the current and future trends of the engineering plasticsmarket in Malaysia, Thailand, and Singapore (referred to as Southeast Asia in this study) for

the period 2003 to 2013.The base year followed in this study is 2006, and the forecast periodis from 2007 to 2013. The study provides unit shipment forecasts for the engineering plasticsmarket in these countries. Analysis of the market drivers and restraints along with a detailedmarket analysis and competitive analysis is also presented in this study.

The study contains an in-depth analysis of the major trends witnessed in the totalengineering plastics market in Southeast Asia, followed by a country-wise analysis.



Executive Summary (Contd...)

The total market for engineering plastics in Malaysia, Singapore, and Thailand has beenwitnessing growth in the past 5-6 years and is expected to continue to grow in the futuretoo.

The major drivers include:

Macro economic growth trend

Growth in the end-user industry

Rapid development of the engineering plastics industry

Despite this growing trend, manufacturers of engineering plastics, continue to face certainrestraints that are likely to decrease the demand for their products.

The major restraints include:

Increasing cost of raw materials

Erosion of profit margins due to stiff competition




Application of Engineering Plastics

Engineering plastics are used in an increasingly large number of applications. The applicationareas are generally categorized by the end-user industries. There are four broad applicationgroups for engineering plastics in Malaysia, Singapore, and Thailand. They are:

Automotive industry

Electronics and electrical industry

Household and office appliances

Others (includes toys, medical equipment, sports equipment, and general purposeapplications)

Engineering plastics are characterized by higher price and better performance than commodityplastics. Their most notable properties are high stiffness and strength, high resistance to heat

distortion, high dimension stability, high resistance to weathering, and resistance to a widevariety of chemicals.

There are numerous applications for engineering plastics. The most important end-user is stillthe automotive industry, followed by the electrical and electronics industry, and household andoffice appliances. Other markets include toys, medical equipment, sports equipment, andgeneral purpose applications.




The total market for engineering plastics in Malaysia, Singapore, and Thailand in terms ofunit shipment was 243,400 tons in 2006. Unit shipment is forecast to grow at a rate ofabout 8.4 percent each year to reach 426,800 tons by 2013.

Of the three countries covered in this study, Thailand is the largest market forengineering plastics. This country represents 58.5 percent of the total units, followed byMalaysia with 23.7 percent, and Singapore with 17.8 percent.

The three countries covered in this study are expected to maintain their positions as in2006 till 2013. Thailand take the lead in 2006, with about 58.5 percent share, and isexpected to maintain higher growth compared to other countries. By 2013, it is expectedto hold approximately 67.6 percent of the unit share in the total engineering plasticsmarket.




Growth of the engineering plastics market in Thailand can be attributed to an increase inend-user demand, following the expected expansion and growth of its automotiveindustry. Macroeconomic factors such as foreign capital investment and ASEAN Free

Trade Area (AFTA) in Thailand drive the growth of engineering plastics in the country.Increase in electrical and household appliance manufacturing is expected to generate anincrease in consumption for engineering plastics. As a result, Thailand is projected towitness an increase in its market revenues by 2008.

The revenue share for Singapore is projected to decline. Due to the high productioncosts, many end-user companies are likely to prefer to relocate their plants toneighboring Asian countries, where labor and rental costs are much cheaper. This is theprimary reason for the projected decline in the revenue share of the Singapore market.Nevertheless, the potential revenue forecast is expected to maintain Singapores positionas the second largest market among the three countries.

Detailed analysis of each country is included in the country segments of this researchservice.




Analysis by Major Segments

Polyamide Market

The PA market is one of the smallest two engineering plastics segments in Malaysia,Singapore, and Thailand. This segment represents approximately 7.9 percent of the totalunit shipment, and is set to decrease to about 7.0 percent in 2013. The total unit shipmentof PA market in Malaysia, Singapore, and Thailand was 17,300 tons in 2006.

Polycarbonate Market

The PC engineering plastics segment is the largest segment in the total market. This

segment represents 57.1 percent of the total engineering plastics market, and is set toincrease to 62.7 percent in 2013. It witnessed a unit shipment of 139,000 tons in 2006.




Market Segment Analysis

Polyoxymethylene Market

The POM segment is the second largest engineering plastics segment in Malaysia,Singapore, and Thailand. This segment represented 15.6 percent of the total engineeringplastics market in 2006. The unit is set to increase from 38,000 tons in 2006 to 63,300 tonsin 2013, and the percentage unit of this segment is expected to remain mainly unchanged

in 2013 from 2006.

Polybutylene Terephthalate Market

The PBT segment is the other smallest engineering plastics segment in the threecountries. This segment represented 7.8 percent of the total engineering plastics market,and is set to slightly decline to about 5.9 percent in 2013. The PBT segment in Malaysia,Singapore, and Thailand witnessed a unit shipment of 18,900 tons in 2006.




Market Segment Analysis

Other Engineering Plastics Market

The other engineering plastics segment is the third largest segment in Malaysia,Singapore, and Thailand. The other engineering plastics segment was worth 28,200 tons in2006. This segment represented 11.6 percent of the total engineering plastics market in

the three countries, and is expected to further decline to about 9.6 percent in 2013.


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Total Southeast Asia Engineering Plastics Market


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Market Engineering Measurements

Total Engineering Plastics Market: Market Engineering Measurements(Singapore, Malaysia, and Thailand), 2006

Measurement Names Measurement Trend

Market age DevelopmentStage

-

Units (in base year 2006) 243.4 kt Increasing

Potential units (in year 2013) 426.8 kt Increasing

Base year market growth rate 8.3% -

Compound annual growth rate 8.4% Increasing

Price sensitivity High Increasing

Price range $1,700 to4,000/ton

Increasing

Number of products 5 Increasing

Competitors (active market competitors in 2006) 15 to 20 Stable

Degree of competition 9 Increasing

Note: All figures are rounded; the base year is 2006. Source: Frost & Sullivan


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The markets in Malaysia, Singapore, and Thailand were among the most robust

engineering plastics markets in the Southeast Asian region. Since the 1998 economic

crisis in Southeast Asia, as well as the 2001 global economic slowdown, the engineering

plastics industry has been through a recovery period, and is seeing a positive growth in

the past five years.

Some countries such as Thailand are expected to benefit from the increased exports,

while countries such as Singapore are expected to see their exports and demand decline.

End users in these countries are expected to relocate to more cost-effective

manufacturing sites in the hope to lower costs and improve profit margins.

To a certain degree, Malaysia is expected to lose some of its competitive advantage in

the engineering plastics industry to neighboring Thailand.

The market for engineering plastics can be segmented into five product categories. These

are:

Polyamide (PA)

Polycarbonate (PC)


Polybutylene terephthalate (PBT)

Others, polystyrene (PS), polyphenylene oxide (PPO), and polymethylmethacrylate (PMMA)

Market Overview and Introduction


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Key Industry Challenges

Total Engineering Plastics Market: Impact of Top Industry Challenges (Singapore,Malaysia, and Thailand), 2007-2013

Challenge 1-2 Years 3-4 Years 5-7 Years

Increasing cost economics High High High

Market shift in the end-user industry High High High

Globalization expected to heighten competition High High Medium

Price pressures stifling technological innovation High Medium Medium

Restructuring of the market threatening smallersuppliers

High Medium Medium

Limited domestic production of engineering plastics High Medium Medium

Emergence of new technologies to drive somemarkets

Medium Medium High

Political and social uncertainty to limit growth in

investment

Medium Medium Medium

Source: Frost & Sullivan


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Key Industry Challenges (Contd...)

Increasing Cost Economics

The overall decrease in profit margins is attributable to factors such as high prices of crudeoil, increasing raw materials costs, and raw materials and inventory costs.

Market Shift in the End-user Industry

The automotive assembling operations and electronics sector provides a large market forengineering plastics. However, with rising cost of production, especially in Malaysia andSingapore, and the opening up of markets in 2005 under the AFTA agreement, many endusers are relocating to other more cost-effective parts of Asia such as China and Thailand.

This poses an increased challenge to the engineering plastics manufacturers in Malaysiaand Singapore.


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Globalization Expected to Heighten Competition

The Malaysian, Singapore, and Thai markets for engineering plastics are expected to becomeeven more competitive due to globalization. As part of the World Trade Organizations

agreement on world trade, countries have agreed to reduce import tariffs to below 5 percent inthe first few years of the new millennium. Trade barriers for finished goods are likely to godown. This poses a major challenge to many engineering plastics manufacturers, as there isnow the looming threat of cheaper products coming into the market from countries such asJapan, Taiwan, and South Korea. This is expected to intensify competition, and may cause

some consolidation in the industry, as companies may seek to gain economies of scale.

Price Pressures Stifling Technological Innovation

The suppliers are under price pressure not only from the customers that wish to get the

engineering plastics at the lowest price possible, but also due to rise in raw material costsbecause of increasing short energy supply all around the world. The highly priced market hasmade manufacturers focus more on price as a competitive edge to increase their share ratherthan technology innovation. It is a major challenge for companies to buck the price-sensitivemarket and aim for the high-end, more profitable market. Overall, the engineering plastics

market has become very price competitive, and such a situation has only resulted in costreduction. Investment in R&D is negligible.


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Restructuring of the Market Threatening Smaller Suppliers

Engineering plastics is largely becoming a large-volume business. Moreover, companies

that have higher economies of scale are likely to benefit in the long term. Globalization islikely to drive big MNCs manufacturers in the region to consolidate, plan for expansion, orhave a regional production plant in Thailand or Malaysia. Smaller manufacturers ofengineering plastics are likely to face stiff competition.

Limited Domestic Production of Engineering Plastics

Engineering plastics are characterized by higher price and better performance thancommodity plastics, which have a small share of the total plastics market, considering the

limited availability and high import costs. There is limited domestic production ofengineering plastics in Southeast Asia. A large portion of engineering plastics is importedfrom Japan, Europe, and the United States. The cost of importing engineering plastics ishigher than the actual price of engineering plastics as the cost of transportation andlogistics is high. These are major barriers to greater usage of engineering plastics. The

impact of challenge is expected to lessen as more companies set up manufacturing plantsin the region.


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Emergence of New Technologies to Drive Some Markets

New technology engineering plastics have been introduced in some markets in the region.In the long term, with liberalization and increasing competition, the large companies in this

region may be forced to manufacture high-end engineering plastics to have a competitiveadvantage. PC/ABS is basically a high-strength engineering plastic, consisting of advancedplastic alloys combined with conventional ABS resins. They have better economies of scaleas they consume less raw material, and at the same time, exhibit excellent physicalproperties. These new technology products are expected to sustain growth, particularly in

the mature markets. It is likely that the trend will catch up in the rest of Asia as demand forengineering plastics that have low costs of raw materials is likely to be an attractivealternative.

Political and Social Uncertainty to Limit Growth in Investment

In the Southeast Asian region, the economy is closely linked to the political outlook. Theunstable political situation in some countries such as Indonesia, the Philippines, Malaysia,and Thailand in the region has dampened the possibilities of growth. This has hurt investorconfidence as companies defer or prioritize other areas such as China for business

development. An uncertain political and economic outlook in the region is a majorimpediment to growth in investments.



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Market Drivers

Total Engineering Plastics Market: Market Drivers Ranked in Order of Impact(Singapore, Malaysia, and Thailand), 2007-2013


Rank Driver 1-2 Years 3-4 Years 5-7 Years

1 Macro economic growth trend High High High

2 Growth in the end-user markets High High High

3 Rapid development of the engineeringplastics industry



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Market Drivers (Contd...)

Macro Economic Growth Trend

The total engineering plastics market in Singapore, Malaysia, and Thailand has grownsteadily since 2003 aided by a stable and healthy economic growth trend over the last fewyears. Singapores gross domestic product (GDP) growth rate of 2006 at 7.9 percent washigher than its growth rate of 6.6 percent in 2005. Malaysia and Thailand also experienceda positive growth of 5.2 percent and 5.0 percent in 2006. The overall stable and healthyeconomic growth in South East Asia plays an important role in fuelling the growth of plasticsindustries.

Growth in the End-user Markets

Malaysia is one of the leading electrical and electronic product exporters worldwide.

Almost 1000 companies in this industry are incorporated in Malaysia. While Thailand isthe worlds second largest pick-up truck market and ASEANs largest automotive marketand assembler. The electrical and electronics industry and the automotive industry are thetwo largest consumers of engineering plastics in SEA. Growth of these two industries isdriving the demand for engineering plastics especially in Malaysia and Thailand.


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Rapid Development of the Engineering Plastics Industry

Improvement in technology not only increases the number of engineering plasticsapplication, but also enables new plastic types to be produced. New engineering plasticsare constantly being developed every year for tougher performance, higher quality, andwider applications to serve customers better and meet their specific needs. Plastics areinching their way into new applications and market. There are still tremendous

opportunities for technological advancement and product improvement in the market.


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Market Restraints

Total Engineering Plastics Market: Market Restraints Ranked in Order of Impact(Singapore, Malaysia, and Thailand), 2007-2013


Rank Restraint 1-2 Years 3-4 Years 5-7 Years

1 Higher cost economics High High High

2Erosion of profit margins due to stiff

competitionHigh High Medium


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Market Restraints (Contd...)

Higher Cost Economics

The production of engineering plastics is highly dependent of raw materials that come fromcrude oil and crude oil derivatives. The continuing rise in crude oil prices has been causingprices of raw materials to increase sharply since 2003. Engineering plastics companies arefinding it difficult to generate high profits because rise in prices are insufficient to coverincreases in production costs.

Erosion of Profit Margins Due to Stiff Competition

In 2006, the engineering plastics market experienced increased competition, not only

because of the high production costs, high raw material costs, but also from importedengineering plastics from countries such as Taiwan and South Korea. Many of the existingengineering companies in Southeat Asia are beginning to lose some of their competitiveadvantage.


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Unit Shipment Forecasts

Total Engineering Plastics Market: Unit Shipment Forecasts (Singapore, Malaysia,and Thailand), 2003-2013

7.8426.82013

7.7395.82012

7.6367.420119.1341.32010

9.0312.82009

8.7287.02008

8.5264.02007

8.3243.42006

8.0224.82005

7.6208.220047.6193.42003

Unit Growth Rate (%)Units ('000 tons)Year

Compound Annual Growth Rate (2006-2013): 8.4%



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Unit Shipment Forecasts (Contd...)

Total Engineering Plastics Market: Unit Shipment Forecasts (Singapore,Malaysia, and Thailand), 2003-2013

0

50

100

150

200

250

300

350

400

450

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Units('000

tons)

.

0

5

10

UnitGrowthRate(%)

Units ('000 tons)

Unit Growth Rate (%)



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Unit Shipment Forecasts (Contd...)Total Engineering Plastics Market: Unit Shipment Forecasts by Country (Singapore,Malaysia, and Thailand), 2003-2013

UGR (%)Units (kt)UGR (%)Units (kt)UGR (%)Units (kt)Year

ThailandMalaysiaSingapore

2003 41.4 1.0 48.5 6.0 103.5 11.22004 41.8 0.9 51.3 5.8 115.1 11.2

2005 42.4 1.4 54.4 6.0 128.0 11.2

2006 43.2 1.9 57.7 6.1 142.5 11.3

2007 44.1 2.1 61.2 6.1 158.7 11.3

2008 45.2 2.4 65.1 6.3 176.7 11.4

2009 46.6 3.1 69.3 6.5 196.9 11.4

2010 47.9 2.9 73.9 6.6 219.5 11.52011 49.4 3.0 77.6 5.1 240.4 9.5

2012 50.8 3.0 81.6 5.1 263.4 9.5

2013 52.4 3.1 85.9 5.2 288.6 9.6

Key: UGR=Unit Growth Rate



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Market Forecasts and TrendsTotal Engineering Plastics Market: Unit Shipment Forecasts by Segment Type (Singapore,

Malaysia, and Thailand), 2003-2013

UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)Year

OthersPBTPOMPCPA

2003 15.9 6.7 102.7 10.6 34.7 2.0 16.7 4.1 23.4 6.32004 16.9 6.7 113.6 10.6 35.4 1.9 17.4 4.1 24.9 6.3

2005 18.1 6.7 125.6 10.6 36.5 3.0 18.1 4.2 26.5 6.4

2006 19.3 6.7 139.0 10.6 38.0 4.2 18.9 4.3 28.2 6.4

2007 20.6 6.6 153.8 10.7 40.0 5.3 19.7 4.4 29.9 5.9

2008 21.9 6.4 170.3 10.7 42.5 6.3 20.6 4.5 31.6 6.0

2009 23.3 6.5 188.5 10.7 45.8 7.7 21.6 4.6 33.6 6.1

2010 24.8 6.5 208.5 10.6 49.7 8.5 22.6 4.7 35.7 6.2

2011 26.4 6.2 226.6 8.6 53.7 8.1 23.4 3.4 37.4 4.8

4.941.13.525.08.763.38.7267.76.329.82013

4.839.23.424.28.458.28.7246.26.228.02012



Note: Others include polystyrene (PS), polyphenylene oxide (PPO), polymethylmethacrylate (PMMA), and others


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Market Forecasts and Trends (Contd...)

Total Engineering Plastics Market: Percent of Units by Segment Type (Singapore,Malaysia, and Thailand), 2003-2013

12.18.618.053.18.22003

Others (%)PBT (%)POM (%)PC (%)PA (%)Year

2004 8.1 54.6 17.0 8.3 12.0

2005 8.0 55.9 16.2 8.1 11.8

2006 7.9 57.1 15.6 7.8 11.6

2007 7.8 58.2 15.2 7.5 11.3

2008 7.6 59.4 14.8 7.2 11.0

2009 7.5 60.3 14.6 6.9 10.7

2010 7.3 61.1 14.6 6.6 10.42011 7.2 61.6 14.6 6.4 10.2

2012 7.1 62.2 14.7 6.1 9.9

2013 7.0 62.7 14.8 5.9 9.6

Note: Others include polystyrene (PS), polyphenylene oxide (PPO), polymethylmethacrylate (PMMA), and others



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Unit shipment for the total engineering plastics market was 243,400 tons in 2006, and is

projected to reach 426,800 tons in 2013. This represents a compound annual growth rate

(CAGR) of 8.4 percent from 2006 to 2013. The total market for engineering plastics is forecast to grow. Healthy growth rate has

been seen during the past four years, and is expected to continue in 2007 and 2008 due

to the regions healthy economy.

Pattern in unit share is expected to be more simple after 2006. Cross-regional tradeincreases after the AFTA agreement goes into full effect. Countries such as Thailand

should expect their regional market share to further increase, while Malaysia and

Singapore are expected to witness a decline in their market share. The Singapore and

Malaysian markets are expected to continue declining throughout the forecast period asrelocation of end users to countries such as Thailand has been occurring since the

beginning 2004.


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The PC segment is the largest engineering plastics segment, followed by the POMsegment. These two types of engineering plastics make up the majority of engineeringplastics types in Malaysia, Singapore, and Thailand. The PC segment comprisedapproximately 57.1 percent of the total market in 2006, while the POM segment

comprised about 15.6 percent of the total units. The PC segment is expected to continueto grow as the dominant market segment throughout the forecast period, while Frost &Sullivan expects a decline in the market share of the POM segment as the POMapplication has been increasingly edged out the scope of engineering plastics as theresult of market shift of end users to countries such as China, India.The other

engineering plastics segment stood at the third place, with 11.6 percent of the total unitshipment in 2006. The smallest segments are the PA and PBT segments, accounting forabout 7.9 and 7.8 percent of the market units, respectively. The application of PA plasticsis growing limited as it has been increasingly replaced by Liquid Crystal Polymer (LCP)and Polyphenylene Sulfide (PPS). Overall, except the PC segment, all the other four

segments are expected to see a market unit share decrease by 2013.


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Competitive StructureTotal Engineering Plastics Market: Competitive Structure (Singapore, Malaysia, and

Thailand ), 2006

Polyplastics Co., Mitsubishi Gas Chemical, Inc., Korea Engineering Plastics Co.,and Ticona formed an alliance for the production of Polyacetal resin in China in2005

Tier 1, multinationalsforeign and domesticTiers of Competition

GE and PetroChina Company Limited cooperated by creating a world-scalepolycarbonate (PC) resin manufacturing joint venture in China

Notable Acquisitions, Mergers

Quality of products, technical service, price, innovation, and new productsCompetitive Factors

Electronics and electrical, automotive sector, household and consumer products,Other general purpose plastics

Key End-user Groups

Toray had alliance with BASF to form Toray BASF PBT Resin Sdn. for PBT

manufacturing at BASFs Verbund site in Kuantan, Malaysia.

ASAHI had a joint venture with Mitsubishi Gas Chemical Company Inc. (MGC) inSingapore, for the production of modified PPO resin and its intermediate

GE announced sale of GE Plastics business to Saudi Basic IndustriesCorporation (SABIC)

Suppliers/manufacturers to distributors or end users

Suppliers/manufacturers to end usersDistribution Structure

Multinationals, importers/tradersTypes of Competitors

15 to 20Number of Companies in the Market



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Competitive Structure (Contd...)

There are approximately 15 to 20 companies supplying to the engineering plastics marketin Malaysia, Singapore, and Thailand. Almost all of them are multinational companies,with headquarters in Europe, Japan, or the United States. The major MNCs that are

present include GE, Dupont, Mitsubishi Engineering Plastics (MEP), Asahi, Bayer, BASF,Polyplastics, and Teijin.

Distribution of engineering plastics is done both through distributors or agents, and bydirect sales to the end users. Distributors are only used in instances when companies do

not have enough sales personnel or are not able to cover certain geographic areas. However, most engineering plastics suppliers prefer to supply directly to the clients and

provide technical support themselves. At times, distributors may not have the necessarytechnical knowledge to support the sale of products.

Engineering plastics have numerous applications and end users. The most important endusers still are automotive and electrical and electronics sectors, business machinery, andhousehold appliances. Other end-user markets include information storage, toys, glazing,and sportswear applications. Companies across the region compete on quality andtechnical support, and prices.


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Singapore Engineering Plastics Market


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The economy in Singapore is small by world standards; however, its Gross National

Product (GNP) is one of the highest, making it one of the richest countries in the world.

This is largely due to the open nature of its economy. Singapore trades up to nearly 4

times its GDP in 2006.

In 2000 and 2001, the global economic slowdown and the sluggish electronics industry

contributed to the decline in growth rate for the engineering plastics industry in Singapore.

Since 2003, Singapore has been through a recovery phase, and is seeing growth for the

engineering plastics industry driven by the manufacturing sector, particularly electronics

and electrical, household, and office goods, as well as automotive parts manufacturing.

These industries drive the demand for engineering plastics such as polycarbonate (PC),

polyoxymethylene (POM), and polyamide (PA) that have a significant share of the

engineering plastics market in Singapore. The growing telecommunications market isexpected to drive the demand for PC and POM for telecommunications equipment.

From 2004 to 2006, the GDP grew by 8.8%, 6.6%, and 7.9%, respectively. This healthy

economic growth is expected to continue driving the growth of engineering plastics

industry for the next 2 to 3 years.


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Engineering Plastics Market: Market Engineering Measurements (Singapore), 2006

Measurement Name Measurement Trend

Market age Mature Stage -






Price range$1,700 to

4,000/ton

Increasing


Competitors (active market competitors in 2006) 15-20 Stable




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Market Drivers

Engineering Plastics Market: Market Drivers Ranked in Order of Impact (Singapore),2007-2013


Rank Driver 1-2 Years 3-4 Years 5-7 Years1 Macro economic growth trend High High High

2 Growth in the end-user markets High High High

3 Favorable government initiatives High High High

4Rapid development of the engineeringplastics industry


5

Rapid development of the chemicals

industry Medium Medium Medium


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Macro Economic Growth Trend

Singapore has been witnessing a continuous booming trend of economic growth over the

past three years. From 2004 to 2006, the economy expanded by 8.8 percent, 6.6 percent,and 7.9 percent, respectively, driven by the growth in world demand for electronics,pharmaceuticals, other manufactured goods and financial services, and growth in theeconomies of its major trading partners--the United States, EU, Japan, and China, as wellas the expanding emerging markets such as India. The government has estimated an

expansion in economy of as much as 7 percent in 2007, after growth of 7.9 percent in 2006.The overall stable and healthy economic growth in Singapore plays an important role infuelling the growth of the plastics industry.


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Growth in the End-user Markets

Manufacturing industry accounted for 26.9 percent of Singapore's gross domestic product

in 2006. The electronics and chemicals industries lead Singapore's manufacturing sector,accounting for 32.4 percent and 32.5 percent, respectively, of Singapore's totalmanufacturing output in 2006. The electrical and electronics industry is the largestconsumer of engineering plastics, which makes up around 70 percent of the total demandfor engineering plastics products in the country. The electronics sector in Singapore is one

of the largest production bases of consumer and industrial electronics in Southeast Asia.The condition of the electronics industry in Singapore increases the demand forengineering plastics.The automotive industry is the second largest consuming sector of engineering plastics.Growing automotive industry in ASEAN countries provides a large market for the plasticautomotive parts molded in Singapore. The continued growth in the automotivemanufacturing industry in the region is expected to spur demand for engineering plasticsin the Singapore market.


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Market Drivers (Contd)

Favorable Government Initiatives

Singapore continues to attract investment funds on a large scale despite its relatively high-cost operating environment. The government has also pursued cost-cutting measures,

including tax cuts and wage and rent reductions, to lower the cost of doing business in thecountry. The government is actively negotiating free trade agreements (FTAs) with 16 keytrading partners, and has already concluded 11 FTAs. These favorable governmentinitiatives have a net effect of increasing the demand for intermediate goods such asengineering plastics resins.

Rapid Development of the Engineering Plastics Industry

The engineering plastics market is one of the most promising and fastest growing marketin the chemicals and plastics industry. Improvement in technology not only increases thenumber of engineering plastics application, but also enables new plastic types to beproduced. New engineering plastics are constantly being developed every year fortougher performance, higher quality, and wider applications to serve customers better andmeet their specific needs. Plastics are inching its way into new applications and market.

There are still tremendous opportunities for technological advancement and productimprovement in the engineering plastics industry.


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Market Drivers (Contd)

Rapid Development of the Chemicals Industry

Chemical and chemical products accounted for 32.5 percent of the value-additions madeto manufacturing in 2006, exceeding electronics as the largest manufacturing industry.

The overall chemical industry saw a robust compound growth of more than 18.3 percentover the latest four years 2001 to 2004, with further rapid growth in the chemical industryexpected to maintain at this level. The Government of Singapore is very keen indeveloping high-technology chemical industries.Because of the regions competitive logistics costs and its world-class chemical logisticsservices, Singapore is a major transshipment hub for chemical products shipped into theAsia Pacific region, with the chemicals trade volume growing at a compound annualgrowth rate (CAGR) of 24.3 percent from 1999 to 2003.These developments drive the demand for high-technology plastics such as PA, PC, andPOM.


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Market Restraints

Engineering Plastics Market: Market Restraints Ranked in Order of Impact (Singapore),2007-2013


Rank Restraint 1-2 Years 3-4 Years 5-7 Years

1 Higher cost economics High High High

2 Sharp drop in electronics export High High High

3 High barriers to entry High High High

4Erosion of profit margins due to stiffcompetition

High High Medium


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Higher Cost Economics

The engineering plastics industry is affected by increasing cost of raw materials in addition toincrease in energy and transportation cost. The increase in crude oil price, globally, is

leading to an increase in energy and transportation cost. Prices for the raw materials thatcome from crude oil and crude oil derivatives have been on the increase starting mid 2004,and are expected to continue to grow for the next 1 to 2 years. According to the increasinglyintense energy supply scenario around the world, it is projected that raw materials cost willremain higher.

Sharp Drop in Electronics Export

Due to the high production costs, many manufacturing companies are likely to preferrelocating their plants to neighboring Asian countries, where labor and rental costs are much

cheaper. The shift of end-user industries such as electrical and home appliances, consumergoods, and also labeling/tape converter companies have caused the shrinking of the marketfor engineering plastics in Singapore. On the other hand, Singapore has been seeing a dropin electronics shipment in the recent years, which was due to weaker exports of disk drives,consumer electronics, transistors, and integrated circuits.

Market Restraints (Contd )


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High Barriers to Entry

Singapore is a mature market for engineering plastics, and there are high barriers for apotential entrant to penetrate into this market. End-user companies are usually reluctant to

switch supplier, not only because they already know the quality of existing engineeringplastics firms in the market, but also because OEMs designate the suppliers under a lot ofoccasions.

Erosion of Profit Margins Due to Stiff Competition

Most of the engineering plastics MNCs have their regional offices in Singapore, which servethe whole ASEAN market. The competition, both from Singaporean companies as well asfrom the foreign suppliers, is intensely high because of high production costs, high rawmaterial costs, and low prices. The smaller companies having lower scales of operation are

unlikely to face stiffer competition from the larger companies.Companies in Singapore are facing further erosion in profits as profit margins are affected byvarious factors including high domestic manufacturing costs, high raw material costs,competition from imports, and a mature market. As Singapore is becoming a high-costcenter for manufacture, the government has also encouraged firms to invest outside

Singapore, with China being the top destination.


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Unit Shipment Forecasts

Engineering Plastics Market: Unit Shipment Forecasts (Singapore), 2003-2013

3.152.42013

3.050.82012

3.049.42011

2.947.92010

3.146.62009

2.445.220082.144.12007

1.943.22006

1.442.42005

0.941.82004

1.041.42003

Unit Growth Rate (%)Units ('000 tons)Year

Compound Annual Growth Rate (2006-2013): 2.8%Note: All figures are rounded; the base year is 2006. Source: Frost & Sullivan

Unit Shipment Forecasts (Contd )


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Unit Shipment Forecasts (Contd)

Engineering Plastics Market: Unit Shipment Forecasts (Singapore), 2003-2013

0

20

40

60

80

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Uni

ts('000tons)

0

5

10

UnitGro

wthRate(%)

Units ('000 tons)




49/169

Unit Shipment Forecasts (Contd )


50/169


Unit Shipment Forecasts (Contd)

Engineering Plastics Market: Percent of Units by Plastic Type (Singapore), 2003-2013

14.114.526.538.36.62003


2004 6.8 41.0 23.6 14.4 14.22005 6.9 43.6 21.0 14.2 14.3

2006 6.9 46.3 18.5 13.9 14.4

2007 7.0 49.0 16.3 13.6 14.1

2008 7.0 51.7 14.3 13.3 13.7

2009 6.9 54.1 12.8 12.9 13.3

2010 6.8 56.4 11.4 12.5 12.9

2011 6.8 57.3 11.1 12.2 12.62012 6.7 58.5 10.8 11.8 12.2

2013 6.6 59.6 10.5 11.5 11.8Key: UGR=Unit Growth Rate

Note: Others include polystyrene (PS), polyphenylene oxide (PPO), polyethylene terephthalate (PET), and others


M k t F t d T d


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Market Forecasts and Trends

Singapore is a mature market for engineering plastics. A continuous healthy economic

growth trend over the past three years has played an important role in sustaining the

stability of the whole chemical industry including engineering plastics sectors. More

importantly, Singapore is a world-class logistics hub and trading center. A large portion ofengineering plastics is imported into Singapore and exported again to other countries.

Unit shipment for the engineering plastics market was 41,400 tons in 2003. Since then,

unit shipment growth has been quite flat, between 0.9 and 1.9 percent, per annum. Unit

shipment for the market was 43,200 tons in 2006 in Singapore. After 2006, growth withinthis market is expected to range from 2.1 percent in 2007 to 3.1 percent in 2013, when the

market is forecast to reach an estimated 52,400 tons in 2013.

The CAGR, in terms of unit shipment, for the period from 2006 to 2013 is anticipated to be

2.8 percent.

Market Forecasts and Trends (Contd )


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The PC market is the largest engineering plastics segment, which makes up the majority

of the engineering plastics market in Singapore. This segment represented 46.3 percent

of the total engineering plastics market units in 2006, and is expected to significantly

increase its dominating market share to 59.6 percent in 2013.

The POM segment was in the second place, with 18.5 percent of the total market share

in 2006, and is expected to shrink heavily throughout the forecast period, with segment

share slipping to 10.5 percent in 2013. The other engineering plastics segment and thePBT segment engineering plastics segments accounted for 14.4 and 13.9 percent of the

total market units. These two segments are expected to witness a slight decline in their

shares to 11.8 percent and 11.5 percent, respectively in 2013. The smallest segment is

the PA segment, which represents only about 6.9 percent of the total market units, and is

not expected to change by any significant amount in future five years.

Pricing Trends


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Pricing Trends

Engineering Plastics Market: Pricing Trends (Singapore), 2006

2,000

2,400

1,900

3,000

3,500

Price ($/ton)

UPOthers

UPPolybutylene Terephathalate (PBT)

UP

UP

Up

06/05 Trend

Note: Others include PMMA, PPO, and PET


Polycarbonate (PC)

Polyamide (PA)

Segment


P i i T d (C td )


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Pricing Trends (Contd...)

The engineering plastics industry is affected by increasing cost of raw materials. Pricesfor raw materials that come from crude oil and crude oil derivatives have been on therise starting mid 2004, and are expected to continue to grow for the next 3 to 5 years.

According to the increasingly intense energy supply scenario around the world, it isprojected that raw materials cost will remain high.

The prices of most types of engineering plastics have been on an upward path since2004. The prices of some types of engineering plastics such as PC decreased slightly

at the end of 2006 because of the oversupply scenario in the market, followingincrease in competition in the engineering plastics market. Prices are expected tocontinue showing an upward trend in the next 3 to 5 years, and remain stable at thehigh level.

Competitive Structure


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Competitive StructureEngineering Plastics Market: Competitive Structure (Singapore), 2006

DuPont Engineering Polymers selected Singapore for the expected investment

in two of its highest-growth businesses DuPont Zytel HTN, high-performance polyamide expected to come on stream in 2009 and DuPontVespel parts and shapes expected to be operational in 2007 .

1 tier, multinationalsforeign and domesticTiers of Competition

GE announces sale of GE Plastics business to Saudi Basic IndustriesCorporation (SABIC)

Notable Acquisitions, Mergers,

Expansion

Quality of products, price, innovation and new productsCompetitive Factors

Electronics and electrical, automotive sector, household and consumer products,Other general purpose plastics

Key End-user Groups

ASAHI entered into a joint venture with Mitsubishi Gas Chemical Company Inc.(MGC) in Singapore, for the production of modified PPO resin and itsintermediate. Its MPPO production was 69 kt in 2006.

Suppliers/manufacturers to distributors or end users

Suppliers/manufacturers to end usersDistribution Structure

Multinationals, importers/tradersTypes of Competitors

15 to 20Number of Companies in the Market


Demand Analysis


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Demand Analysis

PA Market: Demand Analysis by Grade (Singapore), 2006

100.0

34.0

66.0

2006 (%)

TOTAL

PA 6

PA 66

Grade


Two of the most popular grades of PA are PA 6 and PA 66. The demand for PA 66 islarger than the demand for PA 6. The application of PA 66 has been decreasing in thepast 3 to 5 years, as the application of PA 66 is growing limited, and it has been

increasingly replaced by LCP and PPS. It contributed approximately 66 percent of thePA market, while PA 6 held 34 percent of the total PA market.

The Singapore market is more sophisticated than the Malaysian and Thai markets, andthat is represented in the usage of PA 66 and PA 6. PA 66 is the higher quality PA,

and is more expensive of the two. Most of the demand in the Singapore market is forhigher grade PA 66.

Demand Analysis (Contd )


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Demand Analysis (Contd...)

PA Market: Demand Analysis by End Users (Singapore), 2006

End-user 2006 (%)

Electronics 80.0

Automotive 15.0

Others 5.0

TOTAL 100.0Note: Others include business machinery, household products, medical devices, and informationstorage


The end users of PA in Singapore show preference for the electronics sector ratherthan the automotive sector. The automotive industry represented only about 15 percent,while the electronics sector represented about 80 percent of the total demand. Theother 5.0 percent goes to electrical and household goods, and other general-purpose

uses.

Market Share Analysis


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PA 6 Market: Market Share Analysis (Singapore), 2006

100.0TOTAL

30.0Others

10.0

10.0

50.0

Share (%)

Note: Others include DSM, Lanxess, and so on

Toray

Dupont

BASF

Company


Market Share Analysis (Contd...)


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BASF

50.0%

Dupont

10.0%

Others

30.0%

Toray

10.0%

Note: All figures are rounded. Source: Frost & Sullivan

Market Share Analysis (Contd)


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Company Share (%)

Dupont 50.0

BASF 15.0

Asahi Kasei 10.0

Toray 5.0

Others 20.0

TOTAL 100.0

Note: Others include Solutia, Rhodia, Lanxess, and so on




61/169


y ( )


Dupont50.0%

BASF

15.0%

Toray

5.0%

Others20.0%

Asahi Kasei

10.0%




62/169


y ( )

In 2006, BASF emerged as the major competitor in the PA 6 market. The companyrepresented about 50 percent of the total market share, while Dupont and Toray each

held 10 percent of the total market share.

In 2006, DuPont was the top PA 66 engineering plastic manufacturer in Singapore. Thecompany represented about 50 percent of the PA 66 market. BASF followed closelybehind with 15 percent, and Asahi came in third, with 10 percent of revenue share in

Singapore. The top three companies held 75.0 percent of the total market revenue.

Demand Analysis


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y

PC Market: Demand Analysis by End Users (Singapore), 2006

5.0Automotive

100.0

40.055.0

2006 (%)

TOTAL

DiscElectronics

End-user


Singapore is a major hub for high-end electronics manufacturing such as laptops and

printers for the Asian region. Coupled with that, Singapore is also one of the centersthat manufacture and supply quality car parts and accessories. Demand for PC plasticsis largest from the electrical and electronics sector, followed by the disc sector andautomotive applications. The electronics sector held about 55 percent of the totaldemand for PC, while the disc industry contributed about 40 percent of the total

demand.



64/169


y

PC Market: Market Share Analysis (Singapore), 2006

7.0Bayer

100.0TOTAL

8.0Others

10.0

25.0

50.0

Share (%)

Note: Others include Dow, LNP, so on

Teijin

MEP

GE

Company




65/169


PC Market: Market Share Analysis (Singapore), 2006

GE

50.0%MEP

25.0%

Bayer

7.0%

Others8.0%

Teijin

10.0%




66/169


y ( )

In 2006, there were three dominant PC multinationals in Singapore. The market shareleader was GE Plastics that represented a significant 50 percent of the total PC marketin Singapore. It was followed by MEP, with 25 percent of the total market share, while

Teijin trailed with about 10 percent share. The other companies, each having marketshares of seven percent or less are Bayer, LNP, and Dow Plastics.

The market share leaders were GE Plastics, Teijin, and MEP. GE Plastics has acompounding plant in Thailand, set up in 2000. The company has managed to increasesome market share as a result of innovations such as new quality PC blends. In 2005, itincreased its capacity by adding two production lines, and are currently compounding32,000 MT per year. MEP has production and compounding factories in Thailand. Thecompany has managed to increase its market share by being able to support its clientswith cost-effective products from its manufacturing plant in Thailand. Teijin has aproduction plant in Singapore, with a capacity of 220,000 MT per year, and hascompounding factories, both in Singapore and Thailand.

Demand Analysis


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POM Market: Demand Analysis by End Users (Singapore), 2006

10.0Others

100.0

25.0

65.0Electrical and Electronics

End-user 2006 (%)

Automotive

TOTALNote: Others include precision components, construction materials, toys, and others

Polyacetals or POMs are also used primarily in the electrical, electronics, and automotiveindustries. Examples of its use can be found in AV equipment such as VCRs, CD/laserdisk/MD players, radio cassettes, headphone stereos, OA equipment such as printers,keyboards, and CD-ROM drives, home electrical appliances such as washing machines

and dryers, and auto parts such as seat belt mechanical components, outer door mirrors,door mirrors, and engine room components, as well as precision components used insuch products as cameras and watches, construction materials, toys such as gamemachines, and stationery.However, the usage of POM in Singapore has declined significantly in the past 3 years,

and this trend is expected to continue because of the market shift of electrical andelectronics industry to other low production cost countries such as China and Vietnam.




68/169


POM Market: Market Share Analysis (Singapore), 2006

5.0BASF

10.0Dupont

15.0MEP

100.0TOTAL

5.0Others

20.0

45.0

Share (%)

Note: Others include Nanya and other smaller importers/traders, and so on

Asahi Kasei

Polyplastics and Ticona

Company




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POM Market: Market Share Analysis (Singapore), 2006

Polyplastics

and Ticona

45.0%

Asahi Kasei

20.0%

Dupont

10.0%

BASF

5.0%

Others5.0%

MEP

15.0%




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In 2006, there were two large multinational companies, each having more than 20percent market share, and two multinational companies with more than a 10 percentshare each in the POM market in Singapore. The competition is high in this segment,but relatively lower than the PC market, as there are more suppliers chasing a smaller

market in the POM segment.

POM is sold directly to the end users or to the distributors. The top four marketshareholders were Polyplastics and Ticona, with 45 percent market share, followed byAsahi Kasei with 20 percent, MEP with 15 percent and Dupont with 10 percent. The fifth

largest revenue shareholder was BASF with 5 percent. Polyplastics is a Japanesecompany that has expanded production to Malaysia. It emerged as the dominantmanufacturer of POM in Malaysia and Thailand. The plant capacity of 33,000 MT inMalaysia is sufficient to supply the market in these three countries and to make a fasterdelivery to the clients. Ticona sells POM through Polyplastics distribution channel in

Singapore.

Demand Analysis

PBT Market: Demand Analysis by End Users (Singapore) 2006


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PBT Market: Demand Analysis by End Users (Singapore), 2006

10.0Others

100.0

90.0Electrical and Electronics

End-user 2006 (%)

TOTAL

Note: Others include automotive, telecommunications, and precision engineering applications

The largest demand for PBT plastics came from electrical and electronics applications.Some PBT plastics are also used in the automotive sector. Approximately 90 percent ofPBT plastics were used in the electrical and electronics sector, while the remainingpercentage was used in the automotive and other industry sectors. PBT plastic isgenerally used in precision system and office automation systems. It is used in CD

ROMs, printers, keyboards, and gears in watches, floppy disks, cameras, andrecorders. PBT is also used in automobile parts such as in-car electronic products andouter door handles. Despite the fact that Singapore has been seeing the shrinking ofelectronics industry and does not have an automotive industry of its own, the growth inthe Asian automotive market such as in Thailand and China provides a huge market

and opportunity for exports of Singapore auto parts molders or manufacturers. Demandfor PBT plastics is expected to remain stable in the next 3 to 5 years.




72/169


PBT Market: Market Share Analysis (Singapore), 2006

15.0Toray

100.0TOTAL

30.0Others

15.0

20.0

20.0

Share (%)

Note: Others include Polyplastics, Nanya, Dupont, and BASF

MEP

Bayer

GE

Company




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PBT Market: Market Share Analysis (Singapore), 2006

MEP

15.0%

Others30.0%

Toray15.0%

Bayer20.0%

GE20.0%




74/169


There are about eight competitors in the PBT market in Singapore. There are four largemultinational companies that hold more than 15 percent share each in the market. Thecompetition in the PBT segment is high as this market is much smaller than the PC and

POM markets. End users of PBT engineering plastics are more price-sensitive than theend users of other segments. This is because PBT, like POM and ABS is the lowerrange product segment of the engineering plastics market. Products that lie in the lowerrange of a segment usually are more price-sensitive than those in the upper ranges.

GE Plastics and Bayer were the largest market shareholders. They lead the market,each with about 20 percent unit share, while MEP and Toray trailed behind, eachholding approximately 15 percent of the total PBT market share, respectively. Marketshares have remained relatively stable in this segment, as they have not beenaggressively pursuing this market. Companies such as MEP focus on PC and POM,while Polyplastics focuses on POM as well. Toray on the other hand, is strong in ABSand other styrenic polymers.


75/169



76/169


Other Engineering Plastics Market: Market Share Analysis (Singapore), 2006

100.0TOTAL

15.0Others

15.0

70.0

Share (%)

Note: Others include Teijin, Asahi Kasei, and so on

Dupont

GE

Company




77/169


Other Engineering Plastics Market: Market Share Analysis (Singapore), 2006

GE70.0%Dupont

15.0%

Others15.0%




78/169


There were about four major competitors in the other engineering plastics market inSingapore in 2006. The largest and most active competitor in the market was GEPlastics, which supplied over half of the other engineering plastics or the majority ofPPO and PET in Singapore. Dupont also sold around 1000 MT PET per year to theSingapore market in 2006. The other companies such as Teijin and Asahi Kaseitogether held a minor share of the other engineering plastics market. Competition inthis segment is not as intense as in the other segments because they do not supplythe same engineering plastics.


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Malaysian Engineering Plastics Market



80/169


Malaysias gross domestic product (GDP) experienced a positive growth of 5.2 percent,

7.5 percent, and 5.2 percent from 2004 to 2006, respectively. In 2007, Malaysias GDP

grew at approximately 5.9 percent. The economy is set to grow at a bigger percentage in

2007. This is due to the expected increase in exports as a result of the healthy globaleconomy.

The market for engineering plastics is highly dependent on the economic conditions, with

the demand being mainly spurred by the industrial and automotive sectors. The

engineering plastics market in Malaysia was approximately 57.7 thousand tons in 2006.Growth for this market was approximately 6.1 percent in the same year. The engineering

plastics market in Malaysia has tremendous potential since the country is likely to

continue developing.



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Engineering Plastics Market: Market Engineering Measurements (Malaysia), 2006

Measurement Name Measurement Trend

Market age Mature Stage -






Price range$1,700 to4,000/ton

Increasing


Competitors (active market competitors in 2006) 15 to 20 Stable



Market Drivers


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Engineering Plastics Market: Market Drivers Ranked in Order of Impact (Malaysia),2007-2013


Rank Driver 1-2 Years 3-4 Years 5-7 Years

1 Growth in the automotive industry High High High

2Growth in electronic and electricalindustry

High High High

3Rapid development of engineeringplastics industry High High High

4 Growing and healthy U.S. economy High Medium Medium

5Investments in the Malaysian

engineering plastics market




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Growth in the Automotive Industry

Malaysia is the main producer and exporter of vehicle parts, components, and

accessories, which have found acceptance in many foreign countries including Thailand,Singapore, Taiwan, Indonesia, Japan, and the United Kingdom. Major automotivecompanies such as Mercedes, Mazda, Ford, General Motors, Suzuki, Nissan, andMitsubishi are increasingly making use of Malaysian products due to their excellent qualityand competitive prices. Apart from automotive parts and components, Malaysia also

produces complete motor cars and motor cycles. Manufacturers such as Proton andPerodua have penetrated over 40 markets, worldwide, convincing customers of the value-for-money of the Malaysian cars. Currently, motorcycles are mainly being exported toSingapore, Greece, Iran, Vietnam, Turkey, Argentina, Malta, and Mauritius. Growth of theautomotive manufacturing industry is driving the demand for engineering plastics in

Malaysia. The automotive component industry experienced a growth in demand as aresult of the national policy to develop an automotive manufacturing industry in Malaysia.



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Growth in Electronic and Electrical Industry

The electronics and electrical industry uses a large percentage of engineering plastics

such as PC, POM, ABS, PBT, and PET. Malaysia is one of the leading electrical andelectronics product exporters, worldwide. Almost 1000 companies in this industry areincorporated into Malaysia. The industry includes major brands such as Panasonic, Sony,Philips, and Samsung, and local brands such as MEC, Khind, and Pensonic. Theproduction range includes air-conditioners, refrigerators, washing machines, vacuum

cleaners, electric fans, instant water heaters, rice cookers, blenders, and microwaveovens. Malaysia is currently investing in R&D in order to expand its production to includemore sophisticated high-end products such as silicon ingots, polishing silicon wafers,RFID, chip design, digital video disc players, electronic games, multimedia products andhigh resolution TFT-LCD and LED plasma displays. The healthy and stable development

of electronics and electrical industry drives the growth of engineering plastics market inMalaysia.



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Rapid Development of Engineering Plastics Industry

Advancement in technology increases the application areas of engineering plastics.

Trends driving the use of plastics in the automotive industry include cost and weightreduction, production efficiency, better structural functions, noise reduction, andaesthetics. New engineering plastics are developed every year for tougher performance,higher quality, and wider applications. Advanced polymer composites and engineeringplastics are also used in aircraft owing to plastics excellent qualities such as stiffness,

dimensional stability, and comparatively lighter weight, compared to other materials. Asthere still are tremendous opportunities for technological advancement and productimprovement, the driver is expected to continue having high impact on the growth of theengineering plastics industry.



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Growing and Healthy U.S. Economy

Growing and healthy U.S. economy drives demand for engineering plastics in Malaysia.

The United States accounts for approximately 18.8 percent of the total exports. TheUnited States and Malaysia launched negotiations for a bilateral free trade agreement(FT A) in June 2006. The United States is also the largest foreign investor in Malaysia.The U.S. companies are particularly active in the energy, electronics, and manufacturingsectors. The cumulative value of U.S. private investment in Malaysia exceeded $10billion in 2005.IT hardware and electronics sector accounted for more than 60 percent of the totalexports to the United States, corresponding to approximately half of the demand forengineering plastics in Malaysia. A healthy global economy and the economic growth inthe United States from 2004 to 2006 has resulted in the growing demand for consumerelectronics products that use engineering plastics.



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Investments in the Malaysian Engineering Plastics Market

Low production costs in Malaysia that spur investments for engineering plastics plants

are likely continue driving the engineering plastics industry in Malaysia. Domesticallyproduced engineering plastics resins have advantages of lower manufacturing costs,logistics, and taxes, making them more competitive compared to imported resins.Companies such as BASF and Toray formed a joint venture for PBT production. Thenewly formed company, Toray BASF PBT Resin Sdn. Bhd., has a world-scale PBT plant,

with an annual capacity of 60,000 metric tons at BASFs Verbund site in Kuantan,Malaysia. Polyplastics have a manufacturing plant in Malaysia, with a 33,000-ton-per-year capacity to produce POM. Such investments have made Malaysia a majorcompetitor in the engineering plastics market in Southeast Asia.

Market Restraints


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Engineering Plastics Market: Market Restraints Ranked in Order of Impact (Malaysia),2007-2013


Rank Restraint 1-2 Years 3-4 Years 5-7 Years1 End-user industries shift High High High

2 Increasing cost of raw materials High High High

3 Lack of resources for R&D Medium Medium Low

4 Competition from traditional materials Medium Medium Low

5 Performance limitations Medium Medium Low


E d I d t i Shift


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End-user Industries Shift

China and India have been a continuous booming economic growth center over the pastdecade. With China entering the WTO, the Chinese Government has been decreasingindustrial duties year by year. This movement has become a great encouragement for

Southeast Asian engineering plastics manufacturers, and at the same time, a huge threat forthe local participants. The end-user industries such as auto making, electronics, electrical,and other household consumer products manufacturing are likely to consider relocating fromMalaysia to other countries such as China, India, Thailand, or Indonesia to take advantage ofthe lower production costs. This shift has contributed to a decline in growth of the

engineering plastics market in Malaysia

Increasing Cost of Raw Materials

Rising costs of raw materials put upward pressure on prices. The production of engineering

plastics is highly dependent on the raw materials that come from crude oil and crude oilderivatives. The continuing rise in crude oil prices is causing prices of raw materials toincrease sharply. Crude oil was priced at approximately $60-70 per barrel in 2006,increasing from a low of $25 in 2003, which has substantially increased production costs forengineering plastics companies. These companies are finding it difficult to generate high

profits because rise in prices is insufficient to cover increases in the production costs.


Lack of Resources for R&D


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The lack of resources for R&D stunts growth of new engineering plastics applications.New engineering plastics application areas are typically researched and developed in thewestern countries. The climatic conditions vary, and the durability of engineering plasticsis different under different conditions. The Asian engineering plastics companies lack theresources to customize R&D for their market and end users. As a result, new applicationsare less likely to be discovered for Asia. This restraint is likely to limit the growth of theengineering plastics market in Malaysia. Improvements and changes are expected to beslow.

Competition from Traditional Materials

Engineering plastics still face tough competition from traditional materials and commodityplastics in some market segments. The use of engineering plastics has grown but their

penetration rate is still small. Although engineering plastics are clearly the better materialsin terms of appearance and durability, metals such as copper remain the most widelyused material for casings and wiring in Malaysia, and aluminum and other metals are stillbeing used to make canopies, shades, and containers. New and cheaper engineeringplastics need to rival the cost of alternative materials, for the industry to have better

penetration.



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Performance Limitations

The performance of engineering plastics is limited by their chemical and physicalproperties, which restricts their applications in potential markets. The amount oftemperature that a material can withstand is an important consideration. A majordisadvantage of using engineering plastics is its limited use within the temperature rangeof minus 50 degrees Celsius to 200 degrees Celsius, while in some instances, metallic

casings can be used at higher working temperatures.


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Engineering Plastics Market: Unit Shipment Forecasts (Malaysia) 2003-2013


93/169


Engineering Plastics Market: Unit Shipment Forecasts (Malaysia), 2003-2013

0

10

20

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Units('000tons)

.

0

5

10

UnitGrowthRate(%)

Units ('000 tons)



Unit Shipment Forecasts (Contd...)Engineering Plastics Market: Unit Shipment Forecasts by Segment Type (Malaysia),2003-2013

OthPBTPOMPCPA


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UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)

UGR(%)

Units(kt)Year

OthersPBTPOMPCPA

2003 3.6 6.0 27.0 9.0 10.6 (2.0) 5.5 5.0 1.7 5.0

2004 3.8 6.0 29.5 9.0 10.4 (2.0) 5.8 5.0 1.8 5.0

2005 4.1 6.0 32.1 9.0 10.2 (2.0) 6.1 5.0 1.9 5.0

2006 4.3 6.0 35.0 9.0 10.0 (2.0) 6.4 5.0 2.0 5.0

2007 4.5 5.0 38.2 9.0 9.8 (2.0) 6.7 5.0 2.1 3.02008 4.7 5.0 41.6 9.0 9.6 (2.0) 7.1 5.0 2.1 3.0

2009 5.0 5.0 45.3 9.0 9.4 (2.0) 7.4 5.0 2.2 3.0

2010 5.2 5.0 49.4 9.0 9.2 (2.0) 7.8 5.0 2.3 3.0

2011 5.4 3.0 52.9 7.0 9.0 (2.0) 8.0 3.0 2.3 3.0

3.02.53.08.5(2.0)8.77.060.53.05.72013

3.02.43.08.3(2.0)8.97.056.63.05.52012



Note: Others include polystyrene (PS), polyphenylene oxide (PPO), polyethylene terephthalate (PET), and others


Engineering Plastics Market: Percent of Units by Plastic Type (Malaysia), 2003-2013


95/169


3.611.421.955.77.42003


2004 7.5 57.4 20.3 11.3 3.5

2005 7.5 59.0 18.8 11.2 3.5

2006 7.5 60.6 17.3 11.1 3.5

2007 7.4 62.2 16.0 11.0 3.4

2008 7.3 63.8 14.8 10.8 3.3

2009 7.2 65.3 13.6 10.7 3.2

2010 7.1 66.9 12.5 10.5 3.0

2011 6.9 68.2 11.6 10.3 3.02012 6.8 69.3 10.9 10.1 2.9

2013 6.7 70.4 10.1 9.9 2.9Note: Others include polystyrene (PS), polyphenylene oxide (PPO), polyethylene terephthalate (PET), and others


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