Some key issues that S'pore's petrochemical sector needs to address

SINGAPORE'S petrochemical sector has, on the surface, plenty of reasons to celebrate. Identified by the government for its strategic importance, the sector has benefited from the fall in crude oil prices, which has delivered improved margins for petrochemical producers, reduced competition and increased production.

Despite a recent rebound, crude oil is still down around 59 per cent compared with June 2014 levels and was trading around US$45 per barrel for WTI (West Texas Intermediate) and US$46 per barrel for Brent as at May 5, 2016. At the same time, prices for naphtha, a key petrochemical feedstock produced from crude oil, fell 60 per cent to US$399.50/metric tonne (mt) CFR Japan for the benchmark Mean of Platts Japan.

Lower oil and naphtha prices have reduced petrochemical input costs by 65 per cent and driven a 158 per cent improvement in margins for petrochemical producers in South-east Asia, including Singapore, as at April 2016, according to Platts Petrochemical Analytics.