Apic2018 Malaysia Report PDF

MALAYSIA PETROCHEMICAL COUNTRY REPORT
2017
PRESENTED TO
APIC – THE ASIA PETROCHEMICAL

INDUSTRY CONFERENCE
KUALA LUMPUR
AUGUST 2018
MALAYSIA PETROCHEMICAL COUNTRY REPORT 2017
Contents
CHAPTER ONE ____________________________________________________________ 3
MALAYSIAN ECONOMY ______________________________________________________ 3
1.1 OVERVIEW OF MALAYSIAN ECONOMY IN 2017 __________________________________ 3
1.2 TRADE PERFORMANCE IN 2017 ______________________________________________ 5
1.3 INVESTMENTS ____________________________________________________________ 7
1.4 ECONOMIC OUTLOOK FOR 2018 _____________________________________________ 8
1.5 MALAYSIA – KEY ECONOMIC INDICATORS _____________________________________ 10
CHAPTER TWO __________________________________________________________ 11

PETROCHEMICAL INDUSTRY IN MALAYSIA ______________________________________ 11
2.1 OVERVIEW _________________________________________________________________ 11
2.2 PLASTICS INDUSTRY _________________________________________________________ 14
CHAPTER THREE _________________________________________________________ 16

COMMITTEE REPORTS ______________________________________________________ 16
3.1 GENERAL MATTERS & RAW MATERIALS COMMITTEE _______________________________ 16
3.2 POLYOLEFINS COMMITTEE ____________________________________________________ 17
3.2.1A LDPE___________________________________________________________________________ 18
3.2.1B LLDPE __________________________________________________________________________ 18
3.2.1C HDPE __________________________________________________________________________ 20
3.2.2 PP ______________________________________________________________________________ 21
3.3 STYRENICS COMMITTEE _____________________________________________________ 212

3.4 PVC COMMITTEE ____________________________________________________________ 24
3.5 SYNTHETHIC RUBBER COMMITTEE _____________________________________________ 245
3.6 SYNTHETHIC FIBER RAW MATERIALS COMMITTEE__________________________________ 30
3.7 CHEMICALS COMMITTEE _____________________________________________________ 32
CHAPTER FOUR__________________________________________________________ 33
MALAYSIAN PETROCHEMICALS ASSOCIATION (MPA) _____________________________ 33
4.1 BACKGROUND ______________________________________________________________ 33
4.2 MPA MEMBERS _____________________________________________________________ 34
4.3 MPA COUNCIL 2017/2018_____________________________________________________ 35
4.4 MPA SECRETARIAT __________________________________________________________ 36
2
CHAPTER ONE
MALAYSIAN ECONOMY
1.1 OVERVIEW OF MALAYSIAN ECONOMY IN 2017
Based on the latest edition of the Bank Negara Malaysia (Central Bank of Malaysia) Annual Report
2017, which was released on March 28, 2018, the Malaysian economy, anchored by domestic
demand, grew strongly by 5.9% (2016:4.2%). A rebound in exports and broad-based global recovery
had further boosted domestic demand. Key external factors driving demand were:
 Higher demand by major trading partners such as the People’s Republic of China, ASEAN, the
European Union, the United States and Japan; triggered by launches for smart devices, which in
turn led to new orders along the supply chain for electrical and electronic (E&E) parts and
components, in particular semiconductors;
 Investment expansion in advanced economies, which also increased demand for non - E&E
products such as petroleum, chemical, rubber and iron & steel products;
 Turnaround in commodity prices after declining for two consecutive years, in particular in crude
oil and liquefied natural gas.
Both export- and domestic-oriented industries expanded capacity, including investing in new
machinery and equipment for replacement and to meet higher demand. Public spending on supplies
and services contributed further to domestic demand. Private consumption also grew, supported
mainly by wage and employment growth.
While most sectors recorded higher growth, the services and manufacturing sectors remained as the
main pillars, with the former growing at 6.2% (2016: 5.6%) and the latter at 6% (2016: 4.4%).
Recovery in consumer sentiments lifted growth in retail, food & beverages, accommodation and
motor vehicles sales; and growth in transportation and storage was spurred on by stronger trade
and air passenger traffic. Information and communication also benefitted from higher demand for
data demand and computer services.
For the manufacturing sector, growth was supported by domestic-oriented industries in commercial
and consumer transport equipment, food and construction related products; export-oriented
industries in E&E and resource-based sectors such as palm-oil and petroleum related products.
3
The construction sector grew at 6.7% (2016: 7.4%), mainly in civil engineering projects in
petrochemical, transportation and the utility sectors. The agriculture sector rebounded to grow at
7.2% (2016: (-)5.1%) due to crude palm oil production; while the mining sector, led by oil & gas
moderated in crude oil supply in line with the OPEC agreement to restrain oil production until end-
2018 but higher production in natural gas due to increased capacity.
The labour force expanded by 303,000 persons and net employment gain was 295,000 jobs mostly in
high- and mid-skilled positions, increasing by 121,100 and 150,700 persons respectively.
Unemployment remained stable at 3.4%. Aggregate nominal wages in the private and public sectors
grew 6.4% and 6.2% respectively (2016: 4.3% and 6.4%). Reported lay-offs continued to decrease to
35,097 persons (2016: 37,699 persons), mainly in manufacturing as multinationals reconfigured their
global value chains in line with changing business needs. Real value-added per worker rose 3.6%
(2016:3.6%), mainly due to productivity gains in the manufacturing (4.7% growth) and services (4.2%
growth) sectors. Real wage per employee in the manufacturing sector grew 2.2% (2016: 4.1%).
Headline inflation increased to 3.7% in 2017 (2016: 2.1%), primarily driven by higher domestic fuel
prices, higher global commodity prices and disruptions in domestic food supplies. Transport costs
led the increase, growing by 13.2% (2016: declined by 4.6%) followed by food and non-alcoholic
beverages at 4% (2016: 3.8%). The producer price index for local production registered a 6.7%
increase, led by prices of non-food crude materials for further processing which grew 17.9% (2016:
4%), followed by processed fuel and lubricants which grew 15.3% (2016: declined by 16.6%).
The Ringgit appreciated by 10.4% to end the year at RM4.0620 against the US dollar after four
consecutive years of depreciation. The Ringgit was one of the best performing regional currencies,
reflecting the better-than-expected GDP growth, positive investor sentiments and positive global
developments. The Ringgit was also one of the least volatile regional currencies as a result of the
effectiveness of financial market development measures to develop, strengthen and further
liberalise the domestic financial markets, to improve liquidity in the domestic foreign exchange with
additional hedging flexibilities as well as in the bond market.
International reserves were sufficient to finance 7.2 months of retained imports (2016: 8.7 months)
or USD102.4 billion (2016: USD95.4 billion).The balance of trade increased to RM118.1 billion (2016:
101.4 billion). External debt declined to UD215.5 billion or 65.3% of GDP (2016: YSD202.3 billion or
74.5% of GDP). Total debt service ratio as a percentage of exports of goods and services was further
reduced to 22.1% (2016: 24.8%).
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Overall, the fundamentals of the Malaysian economy continued to strengthen in 2017. Structural
reforms remained a priority to strengthen these fundamentals and to safeguard the sustainability of
the growth momentum. Efforts included enhancing domestic value-added in production and
exports; the promotion of higher quality domestic and foreign investments; raising productivity and
the quality of labour.
1.2 TRADE PERFORMANCE IN 2017
Malaysia’s trade in 2017 improved significantly amidst broad-based improvements in the global
economy and trade activity, particularly in the Asian region; and relatively low volatility in
international financial markets. Total trade grew an astounding 18% (2016: 1.4%) to reach RM1.5
trillion, compared to RM1.271 trillion in 2016.
Malaysia’s terms of trade i.e. export prices in relation to import prices or amount of imported goods
which could be purchased per unit of exported goods, improved in 2017 amid recovery in
commodity prices and higher prices for manufactured goods. The terms of trade peaked at 98.0
points in February 2017 before moderating to 97.7 points in December 2017.
Gross exports registered a double digit growth of 18.9% (2016: 1.2%), driven mainly by export
volumes, particularly in manufactured exports. Export volumes grew 11.1% (2016: 2.6%) for the first
time since 2004. Manufactured exports grew by 18.9% (2016: 3.3%) led by E&E products, which was
in turn driven by semiconductors, accounting for 52% of export earnings in that sector or 23.2% of
manufactured exports and 19% of total gross exports earnings. Malaysia’s share of the global market
for semiconductors increased to 5.9% (2016: 5.7%).
Exports of non-E&E manufactured products also rebounded sharply, driven by robust demand for
petroleum, chemical, rubber and iron & steel products. Export earnings from petroleum products
accounted for 9.4% of manufactured exports and 7.7% of total gross exports earnings. In terms of
year-to-year change, exports of petroleum products grew by 31.7% (2016: 0.2%). This was followed
by chemicals and chemical products which constituted 8.9% of manufactured exports and 7.3% of
total gross exports earnings; and in terms of growth, 16.1% (2016: 7.2%). Gross exports of rubber
products grew 29.9% (2016: 0.3%), accounting for 3.4% of total manufactured exports and 2.8% of
total gross exports earnings.
5
In terms of prices, overall export product prices turned around (2017: 4.3%, 2016: declined 7.4%)
with recovery in crude oil (2017: 21.7%, 2016: declined 16.1%) and LNG (2017: 13.6%, 2016: declined
26.9%) prices; while manufactured exports was broadly sustained. Removing the exchange rate
impact, in US dollar terms, Malaysia was the third-best export performer in the region after
Indonesia and Korea, with gross exports improving by 14.9%. This also showed that the main driver
for export growth was not due to the exchange rate.
Gross imports registered double-digit growth of 19.9% (2016: 1.9%), mainly in intermediate goods,
capital goods and goods for re-exports to RM838,145 million (2016: RM698,819 million).
Intermediate and capital goods imports grew 20.0% (2017: RM478,936 million, 2016: RM399,033
million) and 15.3% (2017: 115,621 million, 2016: RM100,245 million) respectively due to robust
export performance of manufactured products and investments in the manufacturing and services
sectors. Better re-export activity, which grew 26.8% (2016: 10.5%) to RM144,457 million, (2016:
RM113,968 million) was driven mainly by petroleum and E&E products to meet regional demand.
49.6% of Malaysia’s export trade was with the East Asia – 8 led by Singapore (14.5%), People’s
Republic of (PR) China (13.5%), Thailand (5.4%), Hong Kong SAR (5.1%), Indonesia (3.7%), Korea
(3.1%), Chinese Taipei (2.5%) and Philippines (1.8%). Exports to advance economies i.e. the European
Union (10.2%), United States (9.5%) and Japan (8.0%) collectively constituted 27.7% of Malaysia’s
total export trade.
Overall imports reflected the direction of export trade i.e. majority or 54.6% to East Asia – 8
countries and 25.4% to advance economies. The breakdown by country / economy was similar to
exports for advance economies; but differed slightly for he East Asia – 8 i.e. led by PR China,
Singapore, Chinese Taipei, Thailand, Indonesia, Korea, Hong Kong SAR and Philippines. This order
also set the direction of Malaysia’s total trade. Trade balance in 2017 improved to RM97.2 billion
(2016: RM88.1 billion).
The current account balance improved to RM40.3 billion or 3.1% of Gross National Income (GNI)
compared to 2016’s RM29.0 billion or 2.4% of GNI. The higher surplus was due to a higher goods
surplus, which offset widening deficits in the services accounts from RM19.1 billion in 2016 to
RM23.1 billion in 2017; due mainly to the transportation (deficit of RM29.7 billion) and insurance
services (RM8.9 billion). The deficit in transportation reflected heavy reliance on foreign service
providers in sea and air freight; while air passenger and ports registered net surplus balances.
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1.3 INVESTMENTS
Based on MIDA’s media release on March 6, 2018, Malaysia recorded approved investments of
RM197.1 billion in manufacturing, services and primary sectors from 5,466 projects, which were
expected to generate an additional 139,520 jobs. Domestic investments (DDI) accounted for 72.2%
or RM142.4 billion; while foreign direct investments (FDI) contributed RM54.7 billion. Overall,
investment performance moderated by 7.4% due to a decline in investments in the services sector,
which was affected by real estate dropping 28.7% in value to RM45.7 billion.
Investments in the manufacturing sector grew by 8.9% and primary sector, 51.2%. Total approved
investments in the manufacturing sector increased 8.6% to RM63.7 billion (2016: RM58.5 billion);
led by petroleum products, including petrochemicals and natural gas with total investments of RM26
billlion; followed by E&E products (RM9.7 billion), non-metallic mineral products (RM7.7 billion),
transport equipment (RM4.8 billion), chemicals and chemical products (RM4.1 billion), machinery &
equipment (RM2.2 billion), food manufacturing (RM2.1 billion) and scientific & measuring
equipment (RM2.0 billion). These eight industries accounted for RM58.6 billion or 92% of total
investments approved in this sector.
Most domestic investments were in new projects (RM31.8 billion) while RM10.3 billion were in
expansion and diversification projects. Foreign investments were more active in expansion and
diversification projects amounting to RM13.9 billion or 64.4% of total FDI approved. Most projects
were involved in high technology, high value-added goods.
The biggest foreign investors were led by PR China, Switzerland, Singapore, Netherlands and
Germany which jointly invested RM121.1 billion or 56% of FDI approved in 2017. In 2016, the top
investors were PR China, Netherlands, Germany, United Kingdom and Korea with total investments
of RM15.4 billion. China’s investments diversified into many industries, including non-metallic
mineral, transport equipment, rubber and E&E products.
Overall, manufacturing projects approved were more capital intensive, recording a notable increase
of 23.7% in the capital investment per employee ratio from RM912,239 in 2016 to RM1,128,742 in
2017. As at December 31, 2017, 2,920 projects out of 3,698 projects approved in the five year period
2013 – 2017 were in production. The rest were under construction or final machinery installation.
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1.4 ECONOMIC OUTLOOK FOR 2018
The Central Bank of Malaysia expects the Malaysian economy is expected to grow by 5.5% to 6% in
2018 amidst stronger global economic conditions, forecasted to expand between 3% to 3.3%.
Domestic demand is expected to continue to anchor growth and private consumption to remain
sustained, supported by continued growth in employment and income and lower inflation. Private
investment growth is also expected to be sustained with ongoing and new capital spending in both
the manufacturing and services sectors.
Both gross exports and imports are projected to grow, lifted by favourable demand by major trading
partners, the continued expansion in the global technology upcycle, the increase in domestic
production capacity and sustained global commodity prices. All economic sectors are projected to
expand, with the services and manufacturing sectors as key drivers of overall growth.
Headline inflation is expected to moderate, averaging 2% to 3%, mainly due to smaller contributions
from global energy and commodity prices; and the stronger Ringgit performance mitigating import
costs. Inflation outlook would depend on global oil prices, which remain highly uncertain.
Upside risks to growth which could include stronger – than – expected global demand, potential
increase in minimum wage and faster – than – expected pick-up in existing and new production
facilities in various industries. Downside risks would be monetary and regulatory policy shifts in
advance economies and rising trade protectionism by major trading partners could impact the
strength of Malaysian exports; and the re-emergence of volatile global commodity prices could
dampen domestic economic activity and sentiments.
Overall investment performance is expected to follow the favourable trend of GDP growth, boosting
business confidence to invest. Private investment is projected to sustain growth a 9.12%, although
public investment is expected to decline by 3.2% as large-scale projects near completion. As at
January 31, 2018, MIDA reported that it had 379 manufacturing and manufacturing-related services
projects totalling RM69.5 billion in the pipeline, mainly in the machinery & metal products, chemical
products, global establishment and support services.
The manufacturing sector, which is projected to grow by 5.9% could expect to see growth among
export-oriented industries would be mainly in chemical related products in the primary related
cluster; sustained demand for E&E products and new production capacity in resource-based
industries such as petrochemicals and rubber gloves. Domestic-oriented industries would be driven
by construction-related materials and strength in food-related products.
8
Gross exports of manufactured products are expected to grow at 9.5%. Malaysia’s semiconductor
export is expected to continue to strong, sustained by demand for use in automobiles and consumer
electronics. Relocation of a sizeable E&E production line to Malaysia would contribute to the exports
of high value-added wireless communication chips. Non-E&E exports such as petroleum, chemical
and metal products would be supported by steady demand from regional economies. In tandem
with manufacturing exports performance, imports of intermediate inputs would continue to expand
to cater for export-oriented manufacturing production.
The services sector, which is projected to grow by 6.1% are expected to be supported by the
wholesale and retail, food & beverages and accommodation sub-sectors; the information and
communication sub-sector reflecting sustained demand for telecommunication and computer
services, and transport and storage sub-sector driven by continued strength in trade activities.
Malaysia is well-positioned to withstand headwinds should the downside risks materialise. The
positive economic environment is expected to provide policy makers with amply policy space to
continue with necessary structural reforms. The domestic financial markets are also resilient and
well-positioned to large intermediate swings of capital flows in the event of volatility.
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1.5 MALAYSIA – KEY ECONOMIC INDICATORS

2015 2016 2017p 2018f
Population (million persons) 31.2 31.6 32.1 32.9
Labour force (million persons) 14.5 14.7 15.0 15.3
Employment (million persons) 14.1 14.2 14.5 14.8
Unemployment (as % of labour force) 3.1 3.4 3.4 3.2 ~ 3.5
Per Capita Income (RM) 36,093 37,792 41,072 42,834
(USD) 9,242 9,110 9,551 10,8853
NATIONAL PRODUCT (% change)
Real GDP at 2010 prices 5.0 4.2 5.9 5.5 ~ 6.0
(RM billion) 1,063.4 1,108.2 1,173.6 1,240.1
Agriculture, forestry and fishery 1.3 -5.1 7.2 3.6
Mining and quarrying 5.3 2.2 1.1 1.8
Manufacturing 4.9 4.4 6.0 5.9
Construction 8.2 7.4 6.7 7.3
Services 5.1 5.6 6.2 6.1
Nominal GNI 5.2 6.2 10.1 6.9
(RM billion) 1,125.6 1,195.5 1,316.3 1,407.6
Real GNI 6.8 4.4 6.1 5.6
(RM billion) 1,039.0 1,084.9 1,150.8 1,215.0
Real aggregate domestic demand1 5.1 4.3 6.5 5.7
Private expenditure 6.1 5.6 7.5 7.6
Consumption 6.0 6.0 7.0 7.2
Investment 6.3 4.3 9.3 9.1
Public expenditure 2.1 0.4 3.3 -0.9
Consumption 4.4 0.9 5.4 0.6
Investment -1.1 -0.5 0.1 -3.2
Gross national savings (as % of GNI) 29.0 29.1 29.2 28.8
BALANCE OF PAYMENTS (RM billion)
Goods balance 109.2 101.4 118.1 120.5
Exports 681.3 686.1 808.9 865.9
Imports 572.1 584.7 690.8 745.3
Services balance -20.6 -19.1 -23.1 -23.2
Primary income, net -32.1 -34.6 -36.1 -39.1
Secondary income, net -21.3 -18.6 -18.6 -19.3
Current account balance 35.2 29.0 40.3 38.9
(as % of GNI) 3.1 2.4 3.1 2.0 ~ 3.0
Bank Negara Malaysia international reserves, net2 409.1 423.9 414.6 -
(in months of retained imports) 8.4 8.7 7.2 -
PRICES (% change)
CPI (2010=100) 2.1 2.1 3.7 2.0 ~ 3.0
PPI(2010=100) -7.4 -1.1 6.7 -
Real wage per employee in the manufacturing sector 3.7 4.1 2.2 -
1 Exclude stocks
2 All assets and liabilities in foreign currencies have been revalued into ringgit at rates of exchange ruling on the balance sheet date, and
the gain/loss has been refl ected accordingly in the Bank’s account
3 Based on average USD exchange rate for the period of January-February 2018
p Preliminary
f Forecast
Note: Figures may not necessarily add up due to rounding
Source: Department of Statistics, Malaysia, Ministry of Finance, Malaysia and Bank Negara Malaysia
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CHAPTER TWO
PETROCHEMICAL INDUSTRY IN MALAYSIA
2.1 OVERVIEW
Malaysia aims to become a new centre of growth for the global petrochemical industry. As a
reputable petrochemicals manufacturing hub, Malaysia churns out polymers, alcohols, phenols,
polycarbonates, among others, and exported to more than 30 countries. Malaysia is expected to
overtake current leaders Indonesia and Thailand by 2020 in terms of production capacity especially
in basics and derivatives chemicals with the completion of integrated refinery and petrochemical
complex project in Pengerang, Johor.
The Malaysian government's investor-friendly policies and the availability of feedstock have been
largely responsible for Malaysia’s petrochemical growth. Over the last decade, Malaysia has
established a near-ideal infrastructure to support a vibrant petrochemicals industry, and investors
benefit from the facilities that are already in place.
In view of roping in new CAPEX for the country’s petrochemical sector, Malaysian government has
set up a third industrial master plan for the petrochemicals industry. The plan focuses on developing
integrated petrochemicals zones which offer centralised utilities, efficient storage services and a
comprehensive transportation network that helps reduce capital and operational costs. The
development of these zones, with clusters of petrochemicals plants, has resulted in a value chain
that ensures the progressive development of downstream petrochemical activities.
Apart from that, the government plans to encourage the private sector to invest in support facilities,
infrastructure and supply services, which are important for the development of the petrochemicals
zones. The investments are to be undertaken through a consortium of JVs. This would enable the
setting and sharing of the costs of building and maintaining the facilities at competitive levels.
The commitment of the Malaysian Government to ensure the country remains attractive to business
investments has received global recognition by various international institutions. The Global
Competitiveness Report 2016-2017, released by the Switzerland-based World Economic Forum,
ranked Malaysia 25th out of 138 economies. With this ranking, the country remained among the
world’s top 20% of the most competitive economies, and was the highest ranked among the
developing Asian countries.
11
In 2017, the total export achieved by the industry was RM25.57 billion, and this figure is expected to
grow to RM36.58 billion in 2020. The country’s role in propelling growth and as a major
consumption centre prompted a number of petrochemical giants – BASF, Mitsui, Lotte Chemical
Titan, Toray Industries, Dow Chemical, Eastman Chemicals, Polyplastics, Kaneka Dairen, Idemitsu
Kosan – to move to the East Coast, building on partnerships or strategic alliances to scale new
heights in terms of production, job creation and innovation.
The Malaysian petrochemical industry is poised for further record growth on the back of planned
expansions and access to feedstock. The country’s goal to be a major regional hub for
petrochemicals will be driven by the US$27 billion PETRONAS’ Refinery and Petrochemical
Integrated Development (RAPID) project in the Pengerang Integrated Complex in Johor, which will
be the central focus of growth in the next few years.
The Pengerang Integrated Complex (PIC) which represents PETRONAS’ largest investment in
Malaysia is part of the Malaysia’s Economic Transformation Programme, ETP which is intended to
position Malaysia as a major energy and commodity petrochemical producer over the next two
decades. Project RAPID is expected to deliver a cumulative Gross National Income, GNI of about
RM18.3 billion by 2020 contributing significantly to the Oil, Gas and Energy National Economic Area,
NKEA target of raising the GNI contribution to RM241 billion by 2020 from RM110 billion in 2009.
Thus, it will spur the growth of Malaysia’s Oil and Gas downstream sector, pushing Malaysia into a
new frontier of technology and economic development.
Approved investments in the chemical and chemical product sectors are expected to surpass the
RM4.1 billion chalked up in 2017. The infusion of investments shows a growing confidence in
prospects for the industry in Malaysia and offers more opportunities for local and international
players downstream to set up manufacturing plants, especially in RAPID.
12
13
Petrochemicals Trade Performance from 2012 and forecast by 2020
2.2 PLASTICS INDUSTRY
The plastics industry registered a total sales turnover of RM29.80b for 2017, representing an
increase of 9.1% from RM27.32b in 2016. Exports increased by 11.2% from RM13.11b in 2016 to
RM14.58b for 2017. Stronger growth in the major markets: Export of bags increased by 7.1% from
RM4.11b to RM4.40b, export of films increased by 18.5% from RM4.49b to RM5.32b. Indirect export
of plastic parts and components in the form of electrical and electronics appliances such as TV and
air-cond has increased by more than 40%.
In 2018, moderate GDP growth of about 5%, and moderate demand from the automotive and
construction sub-sectors is expected. Both direct and in-direct exports will continue to grow with
strong overseas demand, mainly, from the EU and Japanese markets.
14
During the period under review, clarion calls against plastics, in general, had been gaining
momentum, not only in Malaysia but on a global level. In 2016, we had seen the several Malaysian
States taking actions to limit the use of plastic bags and polystyrene food packaging by introducing
bans. In 2017, we observed how these actions were also implemented in other countries affecting
more and more types of plastic products. Starting from 1 January 2018, Canada is reported to have
banned all toiletries containing plastic microbeads. The United Kingdom is set to ban all plastic
straws, Q-tips and single-use plastics as early as 2019. Along with other similar actions, planned or
effected, in other parts of the world, plastics have been labelled as an ‘enemy’ of the world, with
Earth Day 2018 adopting the theme ‘End Plastic Pollution’.
Source: MPMA & DOS
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CHAPTER THREE
COMMITTEE REPORTS
3.1 GENERAL MATTERS & RAW MATERIALS COMMITTEE

Both Malaysian petrochemicals majors have added and are adding significant new petrochemicals
capacities and expanding and debottlenecking existing plants, with some projects completed and
others underway and on schedule. Additional capacity is targeting the growing domestic and Asian
market.
PETRONAS’ the Refinery and Petrochemical Integrated Development (RAPID) project, with 3mn
tonnes per annum (tpa) of new petrochemicals capacity, including 1.1mn tpa of ethylene, and a
300,000 barrels per day (b/d) refinery is expected to come online in 2019 as projected.
Lotte Chemical Titan’s expansion of its Malaysian steam cracking operations was completed in 2017,
increasing the complex’s production capacities for ethylene by 92,000 tpa, for propylene by 170,000
tpa, and for BTX by 134,000 tpa. Construction of third Polypropylene Plant is scheduled for
completion in mid-2018.
On demand side, notwithstanding economic headwinds, Malaysian plastics industry has steadily
increased consumption of polymers in line with a GDP growth and are expected to continue to grow
to cater to both domestic and overseas consumption. All figures in the table are in ktpa.
Nameplate capacity Year 2010 Year 2015 Year 2016 Year 2017 Year 2018 Year 2019 Year 2020
ABS 350 350 350 350 350 350 350
EPS 75 0 0 0 0 0 0
Ethylene 1723 1723 1723 1723 1815 2445 3075
HDPE 485 525 455 455 455 455 855
LDPE 485 485 485 485 485 485 485
LLDPE 100 60 120 120 120 120 470
Monoethylene Glycol (MEG) 380 420 420 420 420 420 1120
Polyethylene Terephthalate 666 666 666 666 666 666 666
Polyethylene (PE) 1070 1070 1060 1060 1060 1060 1810
PP 550 373 390 440 540 640 1540
Propylene 1077 1077 1077 1077 1237 2137 2437
PS 110 110 110 110 110 110 110
PVC 275 110 85 60 60 60 60
Styrene 240 240 240 240 240 240 240
Terephthalic Acid (PTA) 600 600 600 600 600 600 600
Vinyl Chloride Monomer (VCM) 400 0 0 0 0 0 0
Grand Total 8586 7809 7781 7806 8158 9788 13818
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3.2 POLYOLEFINS COMMITTEE

Malaysia was a net exporter of polyolefin products ending in 2013. The major export destinations
were China (including Hong Kong), and countries in the South-East Asia region and India Sub-
Continent. However, due to PETRONAS subsidiary Polypropylene Malaysia mothballing its 80,000
tons/year PP plant in Kuantan, Malaysia at the end of December 2012 and capacity reduction at the
second producer Lotte Chemical Titan from 480 to 400 ktpa in 2013 Malaysia became net
polypropylene importer.
This is set to change starting from 2018, when Lotte Chemical Titan starts its third PP line with a
nameplate capacity of 200,000 tpa, followed in 2019 with PETRONAS bringing its new RAPID
petrochemical project online.
Nameplate capacity Year 2010 Year 2015 Year 2016 Year 2017 Year 2018 Year 2019 Year 2020
HDPE 485 525 455 455 455 455 855
LDPE 485 485 485 485 485 485 485
LLDPE 100 60 120 120 120 120 470
Polyethylene (PE) 1070 1070 1060 1060 1060 1060 1810
PP 550 373 390 440 540 640 1540
Grand Total 2690 2513 2510 2560 2660 2760 5160
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3.2.1A LDPE
18
3.2.1B LLDPE
19
3.2.1C HDPE
20
3.2.2 PP
21
3.3 STYRENICS COMMITTEE
22
23
3.4 PVC COMMITTEE
24
3.5 SYNTHETIC RUBBER COMMITTEE
World Production, Consumption and Trade of Rubber
Global production of rubber grew at an average annual growth rate of 2.7% to 28.4 million tonnes in
2017 from 25.3 million tonnes in 2011. Natural rubber (NR) accounted for 53% of world rubber
production in 2017 with 15.0 million tonnes. Synthetic rubber (SR) made up 47% of the global output
of rubber in 2017 with 13.4 million tonnes. In the first quarter of 2018, total world production of
rubber increased slightly by 0.1% to 7.04 million tonnes from 7.03 million tonnes in the
corresponding period of 2017. Major natural rubber producing countries are Thailand, Indonesia,
Vietnam, China, Malaysia, India, Cote dÍvoire, Myanmar, Brazil and Cambodia
World consumption of rubber in 2017 increased by 3.3% year-on-year (yoy) to 28.4 million tonnes
from 27.5 million tonnes in 2016. Total NR consumption increased by 4.4% yoy to 13.2 million
tonnes in 2017. Total SR consumption grew by 2.4% yoy to 15.2 million tonnes in 2017. China, USA,
India, Japan, Thailand, Malaysia, Indonesia, Brazil, Germany and Russia were the top 10 consumers
of rubber in 2017.
Rubber imports rose by 10.4% to 22.9 million tonnes in 2017 from 20.7 million tonnes in 2016.
Global exports of rubber rose to 22.0 million tonnes in 2017, a 9.7% increase from 2016.
Chart 1: World Production, Consumption in Rubber, 2011 – 2018 (Jan - Mar) (million tonnes)
25
Chart 2: World Trade in Rubber, 2011 – 2018 (Jan - Mar) (million tonnes)
Source: International Rubber Study Group (IRSG)
Malaysia's Production, Consumption and Trade of Rubber
Production of rubber in Malaysia increased by 10.6% yoy to 880.6 thousand tonnes in 2017. During
the first three months of 2018, rubber production declined by 18.5% to 215.6 thousand tonnes from
264.7 thousand tonnes in the corresponding period last year. NR made up 81.6% of total production
of rubber in the first three months of 2018 with 175.9 thousand tonnes, a 25.1% drop from 235.0
thousand tonnes in Q1 2017. Production of SR rose sharply by 33.4% to 39.7 thousand tonnes in the
first three months of 2018 from 29.8 thousand tonnes in the corresponding period last year.
In 2017, rubber consumption grew by 7.6% yoy to 970.3 thousand tonnes. In the first three months
of 2018, total rubber consumption rose by 11.2% to 266.3 thousand tonnes, from 239.5 thousand
tonnes in Q1 2017. Total consumption of NR increased by 10.2% to 129.4 thousand tonnes in the
first three months of 2018 from 117.7 thousand tonnes in the same period last year. Consumption of
SR rose sharply by 12.5% to 136.9 thousand tonnes in the first three months of 2018 from 121.8
thousand tonnes in the corresponding period last year.
26
Chart 3: Malaysia's Production and Consumption of Rubber, 2011 – 2018 (Jan - Mar) (thousand
tonnes)
Since 2015, Malaysia has been a net importer of rubber. Total imports of rubber increased by 20.9%
yoy to 1.62 million tonnes in 2017. In the first three months of 2018, rubber imports increased by
16.0% yoy to 474.1 thousand tonnes. During the same period, NR imports grew strongly by 17.7%
yoy to 337.0 thousand tonnes, accounting for 68.7% of total rubber imports. Imports of SR also
increased sharply by 31.3% yoy to 137.2 thousand tonnes in the first three months of 2018.
In 2017, rubber exports increased by 18.8% to 1.35 million tonnes from 1.13 million tonnes in 2016.
During the first three months of 2018, Malaysia exported 307.7 thousand tonnes of rubber, a
decline of 7.1% compared to the first three months of 2017. NR remained the biggest export in the
first three months of 2018, accounting for 88.3% of total rubber exports. During the same period, SR
exports rose by 11.7% yoy to 39.9 thousand tonnes.
Chart 4: Malaysia's Trade in Rubber, 2011 – 2018 (Jan - Mar) (thousand tonnes)
Exports of rubber products from Malaysia surpassed RM21 billion in 2017, recording a growth of
19.2% yoy. Latex goods remained the largest contributor to Malaysian exports of rubber products,
reaching RM17.5 billion in 2017 and accounted for 80.7% of the total exports of rubber products.
Export of non-latex goods increased by 19.5% to RM4.2 billion in 2017.
27
Chart 5: Malaysia's Exports of Rubber Products, 2011 – 2018 (Jan - Mar) (RM million)
In 2017, exports of general rubber goods and industrial rubber goods expanded by 10.6% and 50.4%
respectively while footwear exports declined by 12.5%. Exports of inner tubes and tyres increased
by 50.4% and 22.4% respectively in 2017 (2016: -25.8%; -2.5%).
Chart 6: Malaysia's Exports of Non-Latex Rubber Products, 2011 – 2018 (Jan - Mar) (RM million)
Malaysian rubber products are exported to more than 190 countries. In 2017, the USA and EU
remained the largest markets for Malaysian rubber products, accounting for a combined 52% share
of total exports of rubber products. Malaysia remains the world's leading supplier of medical gloves
(examination and surgical gloves), supplying more than 50% of the global demand.
28
Chart 7: Malaysia's Exports of Rubber Products by Destination, 2017
Table 1 : Malaysia's Exports of Selected Rubber Products, 2011 – 2018 (Jan - Apr)
Value (RM Million)

Rubber
Product Jan – Apr
2011 2012 2013 2014 2015 2016 2017
2018
Gloves,
Other Than
8,817.00 9,489.20 9,363.20 9,436.50 11,764.80 11,848.80 14,283.80 5,102.80
Surgical
Gloves
Surgical
1,074.50 1,070.60 1,170.30 1,265.40 1,332.20 1,432.60 1,572.00 517.1
Gloves
Tubes,
Pipes and 416.8 422.1 435.4 520.3 656.3 666 843.7 318.1
Hoses
Latex
848.2 658.5 575.4 445.6 515.9 520.5 689.8 211
Thread
Condoms 277.1 336.8 354 325.5 431 388.5 436.8 114.1
Wires,
Cables and
Other 30.7 37.1 36 25.7 33.3 35.3 229 99.3
Electrical
Conductors
Seals and
73.8 72.9 84.5 93.5 137.3 183.3 201.8 70.8
Gaskets
Catheters 149.1 211 316.6 428.1 311.2 201.9 195 62.8
Foam
74.5 73 82.4 96.5 106.9 119.4 132.6 39.1
Products
Precured
58.5 44.7 42.4 97.7 97.6 95.3 108.7 31.7
Treads
Beltings 54.9 70 42.8 39.2 32.2 35.3 35.6 7.7
Finger
13.5 13.5 13 14.5 19.3 20.3 23.9 6.9
Stalls
Teats &
11.8 12.9 17 8.3 15.5 14.4 14.1 4.7
Soothers
29
3.6 SYNTHETIC FIBER RAW MATERIALS COMMITTEE

Ethylene Glycols [Mono-Ethylene Glycol (MEG), Di-Ethylene Glycol (DEG)] as Synthetic Fiber Raw
Material
The Ethylene Glycols (MEG & DEG) market in Malaysia is expected to be stable as domestic demand
growth is expected to be rather limited.
Currently, Malaysia’s leading EG producer is OPTIMAL GLYCOLS (M) SDN BHD which produces three
main products which are Mono-Ethylene Glycol (MEG), Di-Ethylene Glycol (DEG) and Re-Distilled
Ethylene Oxide (RDO), using world-renowned EOG METEOR Technology from Dow, the most
advanced, efficient and cost competitive technology to produce MEG, DEG and high purity EO for
derivatives.
Both, MEG (the largest volume product manufactured by OPTIMAL GLYCOLS) and DEG are sold
within Malaysia and to various countries throughout the Asia Pacific region. OPTIMAL’s production
capacity of MEG is 365kTa and is applied in resins for fibers and PET containers or bottles, antifreeze
as well as electronic applications. OPTIMAL’s production capacity for DEG is 20kTa and used in the
production of unsaturated polyester resins (used for fiberglass) and brake fluid formulation.
The OPTIMAL Group of Companies tap on Dow's established channels and distribution network
within the Asia Pacific region. The company's key markets include South East Asia, Japan, South
Korea, China and Taiwan. About 60 percent of OPTIMAL's products are utilized to meet local
demands with the remaining 40 percent for the export market.
The EG market growth relies heavily on the polyester demand or supply since it is a key feedstock
together with Purified Terephthalic Acid (PTA) in this industry. The Asia market, however, is
projected to have immense potential on the EG growth and consumption.
During the recession in 2008-2009 monoethylene glycol (MEG) market slowed down global but
production has already markedly increased in 2010. Today major MEG producers include Saudi
Arabia, China, Taiwan, USA and Canada. In the near future, global demand growth rate is expected
to be about 6% per year, while China is forecasted to grow at 6.5%. Today China is the largest MEG
consumer, but the country still depends on import. New capacity introductions are expected to solve
this problem partially.
With respect to new MEG capacities in Malaysia, PETRONAS Chemicals Group (PCG) has recently
announced their new refinery and petrochemical project, RAPID (Refinery and Petrochemicals
30
Integrated Development) located in Pengerang, Johor, Malaysia and the project is due for
completion by 2019. MEG is most likely one of the potential products which may be produced by
RAPID.
31
3.7 CHEMICALS COMMITTEE
The chemicals and chemical products industry is one of the leading and vital sector in Malaysia. The
sector covers a wide range of products and comprises agricultural chemicals, industrial gases,
inorganic chemicals, paints, soaps and detergents, cosmetics and toiletries as well as other chemical
products sub-sectors. The chemicals and chemical products industry provides strong linkages and
practically supports almost every other sector of the Malaysian economy.
Products from this industry are key components in industries such as the electrical and electronics,
automotive, oil and gas, pharmaceuticals, construction and others. Establishing a more efficient
ecosystem in the chemical industry will reduce dependency on imported raw chemicals while local
industries benefit from the improved quality and shortened production time for their products.
However, the local chemical industry needs to keep abreast with the latest technology, automation,
R&D and efficiency to stay competitive in the global market.
While opportunities abound in Malaysia, developmental challenges still need to be addressed. In the
current scenario, the key challenges in moving forward will be to ensure that sustainable energy,
environmental & climate protection, innovation, next-generation productivity and digital
transformation of the current manufacturing process will be pivotal to the industry to attain
Malaysia’s transformation goal of becoming a high income developed country.
In 2017, the petroleum products including petrochemicals and natural gas recorded the highest total
approved investments of RM26 billion, followed by electronics & electrical (E&E) products (RM9.7
billion), non-metallic mineral products (RM7.7 billion), transport equipment (RM4.8 billion),
chemicals and chemical products (RM4.1 billion), machinery & equipment (RM2.2 billion), food
manufacturing (RM2.1 billion) and scientific & measuring equipment (RM2.0 billion). These eight
industries accounted for RM58.6 billion or 92% of total investments approved in this sector.
Exports of palm-based oleochemical products increased, slightly by 0.6% to 2.77 million tonnes in
2017 from 2.76 million tonnes in 2016. The higher export volume was due to stronger demand from
China and USA. Nevertheless, the EU maintained as the major export destination with 0.45 million
tonnes (16.2% of total), followed by China at 0.44 million tonnes (15.9%), USA at 0.31 million tonnes
(11.1%) and Japan at 0.23 million tonnes (8.5%). The major palm-based oleochemical products
exported were fatty acids at 0.99 million tonnes (35.7%), fatty alcohol at 0.58 million tonnes (20.9%),
methyl ester at 0.44 million tonnes (15.8%), glycerine at 0.40 million tonnes (14.5%) and soap
noodles at 0.34 million tonnes (12.1%).
32
CHAPTER FOUR
MALAYSIAN PETROCHEMICALS ASSOCIATION (MPA)
4.1 BACKGROUND
The Malaysian Petrochemicals Association (MPA) is a formal association registered with the
Registrar of Societies in Malaysia.
At present, members of MPA comprise companies engaging in the manufacture and trading of
petrochemicals and plastic resins, as well as companies that provide services required by the
petrochemical industry.
MPA was officially formed on March 19, 1997 with the following objectives:-.
 To provide a forum to discuss and resolve common problems of the petrochemical industry
 To provide a focal point for the petrochemical industry to liaise with the public and
government and to make recommendations on relevant issues
 To advance the philosophy of Responsible Care, its implementation and compliance
throughout the industry
 To represent the petrochemical industry within Malaysia to interface with similar groups on
international basis
 To compile and disseminate information of common concerns and provide facilities for
consultation and exchange of views between members.
33
4.2 MPA MEMBERS

MPA has a total of 22 members engaged in the manufacture and trading of petrochemical products:
1. Air Liquide Global E&C Solutions Malaysia Sdn Bhd
2. Ancom Kimia Sdn Bhd
3. BASF (M) Sdn Bhd
4. BASF PETRONAS Chemicals Sdn Bhd
5. Dairen Chemical (M) Sd Bhd
6. Idemitsu Chemicals (M) Sdn Bhd
7. Kemaman Bituman Company Sdn Bhd
8. KOPETRO Trading & Services Sdn Bhd
9. Lotte Chemical Titan (M) Sdn Bhd
10. Mitsubishi Corporation Kuala Lumpur Branch
11. Optimistic Organic Sdn Bhd
12. Petrochemicals (M) Sdn Bhd
13. PETRONAS Chemicals Derivatives Sdn Bhd
14. PETRONAS Chemicals Ethylene Sdn Bhd
15. PETRONAS Chemicals Group Berhad
16. PETRONAS Chemicals LDPE Sdn Bhd
17. PETRONAS Chemicals MTBE Sdn Bhd
18. Petrotechnical Inspection (M) Sdn Bhd
19. Recron Malaysia Sdn Bhd
20. Steel Hawk Engineering Sdn Bhd
21. Technip Geoproduction (M) Sdn Bhd
22. Toray Plastics (M) Sdn Bhd
The Plastic Resins Producers' Group (MPA PRPG) is a product group, established under MPA.
Membership in PRPG is open to manufacturers of plastic resins in Malaysia. MPA PRPG currently has
a total of 6 members:
1. Lotte Chemical Titan (M) Sdn Bhd
2. Petrochemicals (M) Sdn Bhd
3. PETRONAS Chemicals Ethylene Sdn Bhd
4. PETRONAS Chemicals LDPE Sdn Bhd
5. Recron Malaysia Sdn Bhd
6. Toray Plastics (M) Sdn Bhd
34
4.3 MPA COUNCIL 2017/2018
PRESIDENT
Mr Akbar Md Thayoob
PETRONAS Chemicals Group Berhad
VICE PRESIDENT
Mr Cheong Peng Khuan
Lotte Chemical Titan (M) Sdn Bhd
HONORARY SECRETARY
Mr Shamsairi bin Mohd Ibrahim
PETRONAS Chemicals Derivatives Sdn Bhd
HONORARY TREASURER
Dr Sven Crone
BASF PETRONAS Chemicals Sdn Bhd
COUNCIL MEMBERS
Datuk Abdul Rashid Hashim
Ancom Kimia Sdn Bhd
Mr Edmund Tan Teck Boon

BASF (M) Sdn Bhd
Mr Nobuhiro Miyagishi
Idemitsu Chemicals (M) Sdn Bhd
Mr B Sreenivasacharyulu
Optimistic Organic Sdn Bhd
Mr Lim Boon Hoe

Petrochemicals (M) Sdn Bhd
35
Mr Ch’ng Guan How

PETRONAS Chemicals LDPE Sdn Bhd
Mr Mohd Zameer bin Zahur Hussain

PETRONAS Chemicals MTBE Sdn Bhd
Mr Hemant Kedia
Recron Malaysia Sdn Bhd
Mr Yee Kok Leong

Toray Plastics (M) Sdn Bhd
CHAIRMAN
MPA Plastic Resins Producers' Group
Mr Lau Chee Ming
Lotte Chemical Titan (M) Sdn Bhd
4.4 MPA SECRETARIAT
Malaysian Petrochemicals Association (MPA)

c/o Federation of Malaysian Manufacturers
Wisma FMM, No. 3, Persiaran Dagang, PJU 9
Bandar Sri Damansara
52200 Kuala Lumpur
MALAYSIA
Tel: 603-62867200
Fax: 603-62776714
Website: www.mpa.org.my
36

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MALAYSIA PETROCHEMICAL COUNTRY REPORT

APIC – THE ASIA PETROCHEMICAL

CHAPTER TWO __________________________________________________________ 11

CHAPTER THREE _________________________________________________________ 16

3.3 STYRENICS COMMITTEE _____________________________________________________ 212

1.1 OVERVIEW OF MALAYSIAN ECONOMY IN 2017

1.2 TRADE PERFORMANCE IN 2017

1.4 ECONOMIC OUTLOOK FOR 2018

1.5 MALAYSIA – KEY ECONOMIC INDICATORS

Note: Figures may not necessarily add up due to rounding

Petrochemicals Trade Performance from 2012 and forecast by 2020

2.2 PLASTICS INDUSTRY

Source: MPMA & DOS

3.1 GENERAL MATTERS & RAW MATERIALS COMMITTEE

3.2 POLYOLEFINS COMMITTEE

3.3 STYRENICS COMMITTEE

3.4 PVC COMMITTEE

3.5 SYNTHETIC RUBBER COMMITTEE

World Production, Consumption and Trade of Rubber

Source: International Rubber Study Group (IRSG)

Malaysia's Production, Consumption and Trade of Rubber

Chart 7: Malaysia's Exports of Rubber Products by Destination, 2017

Value (RM Million)

3.6 SYNTHETIC FIBER RAW MATERIALS COMMITTEE

3.7 CHEMICALS COMMITTEE

4.2 MPA MEMBERS

4.3 MPA COUNCIL 2017/2018

Mr Edmund Tan Teck Boon

Mr Lim Boon Hoe

Mr Ch’ng Guan How

Mr Mohd Zameer bin Zahur Hussain

Mr Yee Kok Leong

4.4 MPA SECRETARIAT

Malaysian Petrochemicals Association (MPA)

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