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Boston, MA -- (SBWire) -- 06/21/2013 --BMI View: The Philippines' petrochemicals market continues to grow at a strong rate, assisted by economic growth and domestic consumption. However, this is likely to benefit imported petrochemicals, which in spite of planned expansion in the petrochemicals sector, will continue to grow as a proportion of total domestic sales over the long-term.

Based on trends in the country's value of production index (VaPI), BMI estimates that the value of chemical production increased by just 0.5% in 2012, while the value of plastic production surged 11%. However, the value of rubber production plunged 9.6%, a worse result than the 7.4% estimated in our previous quarterly report. In terms of production volumes, chemicals output was up 2.1%, plastics was up 7.7% and rubber was up 1.3%. In volume terms, chemicals output performance was better than the 0.6% growth BMI anticipated, but the value of production was accurate, with profit margins worse than expected. A downturn in external markets coupled with a strong peso militated against growth in domestic chemical production, although the plastics sector was able to buck the trend.

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Key developments in the sector include:

- We estimate that GDP expanded by at least 6.0% in 2012, and forecast the economy to grow by 5.0% in 2013. This is stronger than previously anticipated, suggesting that the petrochemicals market will be more buoyant than expected, sustaining a stronger influx of
- Despite the challenging short-term environment, JG Summit Holdings has revived its plan to build the country's first naphtha cracker plant, which will have 320,000 tonnes per annum (tpa) ethylene capacity by 2014. The development of olefins sources will overcome the main weakness in the Philippines' petrochemical industry, which is dependent on imported ethylene and propylene, as well as aromatics and their derivatives.
- In BMI's Asia Petrochemicals Risk/Reward Ratings (RRRs), the Philippines ranks 12th out of 12 countries, scoring 42.2 points -- up 2.6 points since the previous quarter due to an improvement in the outlook for long-term petrochemicals capacity growth. The Philippines' petrochemicals sector suffers from lack of locally available feedstock and a relatively small and inefficient local polymers manufacturing base, which is incapable of supplying the plastics industry. If the proposed plans for petrochemicals expansion come to fruition, the country could climb up the ratings table, but it is unlikely to exceed India's score. Nevertheless, the Philippines has a supportive business environment in which the petrochemicals industry can grow.

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