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FPG plans to expand in Taiwan and U.S.

FPG plans to expand in Taiwan and U.S.

Formosa Plastics Group., which owns the world's biggest processor of plastics for pipes and imitation leather, plans to invest as much as US$1.5 billion in the U.S. and Taiwan to tap rising demand for chemicals and energy.

The parent may invest US$1.1 billion in Texas in the next five years to expand chemical production and build a power plant, plus as much as US$400 million in Taiwan to boost chemical output, said Lee Chih-tsuen, president of Formosa Plastics Corp., the group's oldest company.

Formosa Plastics Group is expanding as it seeks to gain market share from rivals including Dow Chemical Co. of the U.S. and Germany's BASF AG. The company is betting U.S. economic growth will prompt higher demand for chemicals used in construction, computers and consumer products including handbags, shoes and diapers.

"Demand for petrochemicals usually moves in tandem with the gross domestic product," Lee, 70, said in an interview at his office in Taipei yesterday. Formosa Plastics is expanding in the U.S., because "market demand is there."

The U.S. economy will grow at a 3.4 percent annual rate this year, according to the median forecast in a Bloomberg News survey of 72 economists.

Formosa Plastics' U.S. plan "will help cut costs by bringing production closer to the market," said Kuo Shou-ming, a fund manager at SinoPac Securities Investment Trust Co. in Taipei. "The U.S. and China are the world's biggest petrochemical markets, so they would want to maximize market share there."

Kuo oversees the equivalent of US$59 million of assets including shares of Formosa Plastics Group units Formosa Petrochemical Corp. and Nan Ya Plastics Corp.

The parent plans to build an 180,000-ton-a-year polyvinyl chloride, or PVC, plant in Texas, and a 300-megwatt power plant that will burn petroleum coke, a cheaper alternative to natural gas, Lee said. The group will also expand ethylene production capacity in the U.S., he said. Ethylene is a basic chemical used in most plastics.

Formosa Plastics' plants at Point Comfort, Texas account for 4.4 percent of North American ethylene capacity. The group also has natural gas assets and makes PVC among other chemicals in the U.S.

In Taiwan, Formosa Plastics is seeking government approval to spend between US$300 million and US$400 million in the next three to four years on plants making acrylic esters and super absorbent polymers, according to Lee. Acrylic esters' applications include paint and adhesives, while super absorbent polymers are used in products including diapers.

The Taiwan plan will add to the group's NT$652.8 billion (US$20.4 billion) petrochemical venture in the western town of Mailiao, where Formosa Plastics already has plants capable of producing 1.7 million metric tons of ethylene a year and processing 480,000 barrels of crude oil a day.

Formosa Plastics will boost the capacity of its Mailiao refinery to 540,000 barrels a day before the end of the year, according to Lee. Construction of an ethylene plant that has an annual capacity of 1.2 million tons is also proceeding.

The parent company has been in talks with governments in Taiwan and the Chinese mainland for a chemical project in Eastern China's Ningbo city, Lee said. The proposal, including a 1.2 million-ton-a-year ethylene plant, may cost between US$3 billion to US$5 billion.

"If the mainland doesn't build new plants, the shortage will continue to widen," prompting Formosa Plastics to keep prodding the Taiwan government to allow the project, Lee said. China imports about 10 million tons of ethylene a year, he said.

China uses about 16 million tons of ethylene a year and the nation's demand for the feedstock increases by more than 1 million tons every year, according to Lee.

The Taiwan government bans companies from building ethylene plants in China, on the grounds such projects will siphon too much investment from the island, harming Taiwanese chemical producers.

Taiwan limits investments on the mainland because of concern these may lure business away from the island. China, already the biggest recipient of Taiwan's overseas investments, considers the island a breakaway province and threatens to use force to bring about unification.

Formosa Plastics Corp. has a plant in Ningbo to produce PVC, which is used to make window frames and floors among other plastic products. The company is test running an acrylic esters factory there and building factories that will make polypropylene and super absorbent polymers, according to Lee.

Nan Ya Plastics, the world's biggest processor of plastics for pipes and imitation leather, has about 30 plants in China that make plastic pipes, synthetic leather, and components for printed circuit boards.

Updated : 2021-06-14 01:45 GMT+08:00