Malaysia Chemicals Report 2008

Market Overview

The chemical sector is one of Malaysia's most important industries - the nation has substantial oil and gas feedstock. There are about 100 companies in the Malaysian chemical industry. Malaysia is the world's largest producer and exporter of palm oil. It is also the largest producer and exporter of basic oleochemicals, and accounts for about 17% of the world's output. Further, Malaysia is the fourth-largest producer of rubber in the world, the fifth-largest rubber consumer and among the world's largest exporters of rubber products.

Projects And Expansions Malaysian palm oil company IOI Corporation acquired two oleochemical firms from Indian conglomerate Aditya Birla Group in a deal worth MYR423mn (US$119.41mn). IOI said the purchase of Aditya Birla's Malaysian refinery and oleochemical businesses - Pan-Century Edible Oils (PCEO) and Pan-Century Oleochemicals (PCOC) - would be funded by existing cash reserves and borrowing.

Indian oil and petrochemical company Reliance Industries Ltd. is buying Malaysia's leading polyester producer Hualon Corp., an acquisition that will help the Indian company retain its leadership in the world polyester market.

Free Trade Agreements Malaysia and the US launched talks on a free trade pact in March 2006 but failed to sign a deal before the Bush administration's trade promotion authority expired in June. A delegation of 12 American companies lobbied for the free trade deal in meetings with Malaysian officials. Both countries had hoped to reach a deal by early 2007, but talks were delayed by a change in Malaysia's lead negotiator and Kuala Lumpur's hesitation to open the country's government procurement market to more US companies.

However, in November 2007, Malaysia successfully signed a free trade agreement with Pakistan which will be known as The Malaysia-Pakistan Closer Economic Partnership (MPCEPA). Malaysia is also expected to start negotiations with India for a comprehensive economic co-operation agreement. The talks would aim for a comprehensive bilateral FTA covering trade in goods and services, investments and economic cooperation. Last year, India was Malaysia's ninth largest trading partner, ninth largest export destination and 17th largest import source.

Industry Forecast In 2006, it was expected that the sales of chemicals in Malaysia would be around MYR49.77bn (US$13.55bn). Malaysia's chemical imports in January to November 2007 stood at MYR35.8bn (US$10.42),while exports were MYR30.3bn (US$8.82bn) in the same period. Fuelled by robust demand for plastics parts, components and packaging materials in the global market, the Malaysian plastics industry's total sales were estimated at MYR15.6bn (US$4.27bn) in 2006.

Malaysian Chemicals Industry SWOT