In the medium- to long-term low-cost competitors from Asia and the Middle East could seriously challenge Singapore's export-oriented chemicals industry.
- With major investments in infrastructure and support of large-scale projects the government has encouraged large multinational chemical and pharmaceuticals companies to set up branches in the city-state. Therefore, large international groups dominate the market, while Singapore has the world's third largest refining centre.
- Demand for Singaporean chemical products in Asia is expected to grow further, but a further escalation of the Sino-US trade dispute could disrupt regional and global supply lines. Demand for pharmaceuticals in Singapore remains stable for the time being.
- Profit margins of chemical businesses have remained stable over the past 12 months, with no change expected in H2 of 2019 and in 2020. However, as petrochemical businesses rely on oil imports they could face some pressure on their margins in the coming six months due to rising crude oil prices.
- On average, payments in the Singaporean chemicals sector take between 30 days and 60 days. Payment experience has been very good over the last couple of years, and the level of protracted payments is low. The number of non-payment and insolvency cases was low in 2018 and H1 of 2019, and this trend should largely remain unchanged over the coming 12 months.
- For the time being, our underwriting approach to the basic chemicals as well as the fine and specialty chemicals segments remains generally positive. The same accounts for the pharmaceuticals industry. However, due to the impact of higher oil prices we take a neutral approach to plastics and petrochemicals, especially on trading companies.
- An immediate downside risk to the sector performance is any repercussions on exports should the trade dispute between the US and China escalate. In the medium- to long-term low-cost competitors from other Asian countries and the Middle East could seriously challenge Singapore's export-oriented chemicals industry.
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Market Monitor Chemicals 2019
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