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July 22, 2017

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Petrochemical sector's outlook murky: Formosa Plastics chief

The outlook of the petrochemical industry remains murky, and operators need to act with caution, said Lee Chih-tsun, chairman of Formosa Plastics Corp., yesterday.

He said with the European Union and the United States launching control measures on exports to Iran starting June 28 and July 1, respectively, the impact of those measures remains to be seen.

"The economy, oil prices and the state of the petrochemical industry in the second half is murky and hard to predict," he said.

He said based on his observation, emerging markets like China and India will enjoy steady growth, while growth will also be seen in Japan, which has reconstructed after the March 11, 2011 earthquake.

Yet, with the European debt crisis and weakening economic recovery in the United States, a slowdown in the global economy is still anticipated, he said.

He also commented on the global situation with the production of ethylene, saying new capacity will be 2.2 million tons, most of which are concentrated in China and the Middle East. As for demand, it is estimated to be 3.4 million tons.

Yet for the whole petrochemical industry, demand is expected to drop due to several negative factors, including austere measures taken by European nations, as well as similar contraction measures taken by China to tame inflation. Meanwhile, the formation of a real estate bubble in China is threatening banks and local governments, auguring an economic slowdown that may reduce demands for petrochemical products, he said.

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