Thu, Jul 23, 2015 page13

• Manufacturing sector’s risks are increasing: ITRI

  HEADED FOR A BUST? ITRI cut its sector growth forecast for this year to 0.86%, with petrochemicals leading the across-the-board growth reductions

  • By Lisa Wang / Staff reporter
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  The Industrial Technology Research Institute (ITRI) has slashed its growth forecast for the manufacturing sector to below 1 percent for this year, while warning that risks of a contraction are increasing.

  The institute cut its growth forecast to 0.86 percent, a sharp downward revision from the 2.71 percent it projected in April and 2.93 percent in January.

  Overall, the manufacturing sector is expected to generate NT$19.15 trillion (US$610.81 billion) in total revenue this year compared with last year’s NT$18.99 trillion, it said.

  The institute’s Current Quarterly Model — a gauge of the local manufacturing sector’s risks of contraction — rose to 54.2 percent, approaching the 60 percent level, indicating a bust, ITRI said.

  The figure was a healthy 38.4 percent in April.

  The latest downward revision was across the board, with the biggest cuts falling on the chemicals sector — primarily petrochemicals — with annual revenues expected to shrink 4.2 percent to NT$5.15 trillion, instead of the 0.8 percent expansion the institute project in April.

  “Global crude oil prices have plunged at a faster rate than we thought. We have to adjust our [crude oil] price assumption to US$65 a barrel, from our forecast of between US$70 and US$75 in April,” ITRI analyst Cheng Chih-chiang (陳自強) said.

  Local petrochemical makers are expected to see revenues fall by 12 percent, outpacing the rate of decline for the chemical sector as a whole, the institute said.

  Petrochemicals make up 30 percent of the local manufacturing sectors’ revenues.

  “China’s weakening economic growth and rapid capacity expansion have curbed demand for [Taiwanese] petrochemical products,” Chen said.

  China is the largest export destination of Taiwanese petrochemicals, accounting for 54.9 percent of the total, ITRI data showed.

  Taiwanese petrochemical companies, led by Formosa Plastics Corp (台塑), returned to the black in the first quarter after crude oil prices stabilized, the institute said.

  As demand for purified terephthalic acid (PTA) has declined by 90 percent over the past few years, local petrochemical companies have been seeking new growth opportunities in emerging markets such as India, Vietnam and Myanmar, Petrochemical Industry Association of Taiwan executive manager J.H. Shieh (謝俊雄) said.

  Aside from petrochemicals, Taiwan’s electronics sector are also facing intensifying competition from Chinese manufacturers.

  “Taiwan’s LCD industry is suffering the brunt of growing competition from China, due to a narrowing technology gap, with most locally made flat panels sold to China,” Chen said. “The adverse impact will be even more evident next year as more new Chinese capacities come onstream.”

  Taiwan’s LCD revenues are expected to grow at a slower pace of 0.9 percent year-on-year to NT$946.66 billion this year, instead of the 3.1 percent ITRI estimated earlier this year.

  The electronics sector as a whole would see a 4.38 percent annual growth in revenue to NT$6.29 trillion this year, down from a 5.09 percent expansion estimated in April, ITRI’s statistics showed.

  ITRI said it does not rule out further cutting its forecasts, after several local companies last month issued a bleak outlook.
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