Recently published research from Business Monitor International, "Philippines Petrochemicals Report Q3 2016", is now available at Fast Market Research
[ClickPress, Sun Jul 03 2016] The Philippines' development of olefins and polymer resins production will overcome the main weakness in its petrochemicals industry, which has been dependent on imported ethylene and propylene, as well as aromatics and their derivatives. JG Summit Holdings ' petrochemicals complex has only modest capacity but ensure s that the Philippine petrochemicals industry will have a future, with potential for further investment and diversification .
The petrochemicals industry witnessed a downturn in output revenue in Q116 with the value of basic chemicals output falling 15% y-o-y and rubber declining 11.6%, although plastics grew 1.3%. Much of this loss was due to a decline in prices. While chemicals output volume was up 83% y-o-y according to official statistics, it was down 43% compared to the previous quarter. Plastic and rubber volumes grew 14.3% y-o-y, indicating that output was holding up even as prices were falling.
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JG Summit posted 38.1% growth in core net profit to PHP28.05bn in 2015 with its airline and petrochemical businesses contributing to its earnings. Consolidated revenues went up by 24.1% to PHP229.27bn while cash flow as measured by earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 29.6% to PHP63.79bn. New petrochemicals operations that opened in November 2014 ensured that the JG Summit Petrochemicals Group subsidiary reported PHP26.78bn in revenue, compared to PHP3.23bn in 2014.
We are forecasting real GDP growth to come in at 6.0% and 5.9% in 2016 and 2017 respectively. An important consumer of polymer piping and PVC products, the Philippines construction industry remains positive, and we forecast real growth of 7.5% and 8.9% in 2016 and 2017 respectively.
The automotive industry will emerge as a key consumer of petrochemicals products, but this is unlikely to have a significant role in the petrochemicals market in 2016. Robust domestic demand will bode well for production levels as vehicle demand increases, and we therefore forecast growth of 7.0% in 2016, with annual average growth of 6.6% over our forecast period 2016-2020. This is, however, lower than the 15% average growth forecast in our previous quarterly report.
The Philippines' Petrochemicals Risk/Reward Index is unchanged this quarter at 47.1. The country enjoys positive scores for market risk, and recent growth in capacity has bolstered its potential for further downstream diversification. The Philippines has a supportive business environment in which the petrochemicals industry can grow. It lies 4.0 points behind Indonesia and 14.3 points ahead of Vietnam.
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