Issue Date: January 14, 2013
Asia: Slowdown In China, Although Mild, Is Cause For Concern
Most economists predict that Asia will experience faster economic growth in 2013 than it did in 2012. Still, after last year’s sluggishness, chemical executives remain wary of what 2013 will bring.
Nan Ya Plastics, a member of Formosa Plastics Group that produces a wide range of chemicals, fibers, and industrial parts, is a good representative of industry sentiment. “We are conservative in our outlook for 2013,” says Tsou Ming-ping, Nan Ya’s spokesman. “Final consumer demand remains weak, and this affects demand for our materials.”
China, where Nan Ya sells most of its products, is of particular concern, Tsou says. In recent years, China has been the world’s largest importer of chemicals. When the country’s economic growth slows from the 9–10% achieved in 2010–11 to the 7.5% posted last year, it’s almost a crisis for chemical companies.
Growth in China last year was the lowest in a decade due to a slowdown engineered by the government to prevent inflation. The measure was successful, and the government has already started to adopt a looser macroeconomic policy. The Asian Development Bank expects China’s economy to expand by 8.1% in 2013.
The outlook for India, Asia’s second-largest emerging economy, is also brighter. The Indian economy is gathering speed because of a loose monetary policy and a recovery in the agricultural sector, according to the Organisation for Economic Cooperation & Development. Confident about the future, India’s biggest chemical producer, Reliance Industries, is moving forward with a major expansion of its Jamnagar complex.
In contrast, the outlook for Japan is not bright, and the Asian Development Bank predicts lower economic growth this year than in 2012. But Japan’s chemical companies may actually have a decent 2013. In a research note, Yoshihiro Azuma, a stock analyst at the brokerage firm Jefferies & Co., wrote that aggressive spending by Japan’s new prime minister, Shinzo Abe, will boost demand for petrochemicals. Asahi Kasei, a chemical company that produces construction materials and residential homes, will also benefit, he wrote.
On the whole, 2013 will not be a bumper year for chemical companies exposed to Asia, but it is likely to be better than 2012 was.
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