Chemical Industry
1. Chemical Industry
Industrial Structure
Chemical industry is a significant basic industry for the development of other manufacturing and service sectors that play an important role to overall national economic system. At present, chemical industry consists of many entrepreneurs and has diversified product types. However, the industry can be classified by production process into primary, intermediate, and finished chemical industry. Over 80% of domestic production is for finished chemicals, which most industries are for substitution of import and some products can be improved to export, such as monosodium glutamate and cosmetics, etc. Raw materials cost is the greatest portion in total cost of chemical industry, as approximately 60% because Thailand has to import raw materials from overseas with high import duty that impedes the industrial development. Thailand has approximately 1,700 factories in chemical industry (Department of Industrial Works, 2000), of which 10% is primary and intermediated chemical industries that require labor, high capital and technology and the rest, which is more than 80%, is the finished chemical industry. The characteristics of the industry are that when the production increases, the unit cost decreases (Economies of Scales) or continuous production. Domestic market is the major market for chemical products, and raw materials cost, market size and energy are the important factors of competitiveness in this industry.
Manufacturing Conditions
In 2002, the manufacturing condition of important basic chemicals, namely caustic soda, chlorine, sulfuric acid, citric acid and formic acid, especially caustic soda and chlorine, has increased from 2001 because Bayer Thai, Co., Ltd. expands 2 more factories to produce polycarbonate requiring chlorine as its raw materials. Therefore, the demand of caustic soda increases as well because chlorine is a by-product of caustic soda production.
Import and Export
In 2002, the total import value of chemical products is 230,000 million baht, slightly increased by 0.23% compared to last year, of which 40.75% is of the import of primary chemical products (organic and inorganic), while the export value is approximately 75,000 million baht, increased by 7.6% from the previous year. Organic chemical products are mostly exported as of 38.27% of total export value. Such information shows that Thailand has a great trade balance deficit because of the huge import of primary chemicals, while the export is approximately one-third of the import. Therefore, Thailand should study about the potential to manufacture primary chemicals for substitution of import and also to strengthen other related industries.
Trend
The trend of the primary chemical industry in production and employment decreases because the domestic electricity cost is higher than that of competitors, causing the higher production cost and unable to compete with foreign countries. In addition, the domestic manufacturers will face a market dumping from competitors if the government has no measure to protect them.
2. Paint Industry
Structure and Manufacturing Conditions
At present, there are more than 200 paint-producing entrepreneurs in Thailand, of which 90% are small enterprises invested by Thai and other big 5 manufacturers, such as TOA paint Co., Ltd., ICO Co., Ltd., Jotan Thai Co., Ltd., Thai Kunsai Paint, Co., Ltd., and Nippon Paint Co., Ltd., constituting 90 – 95% of total domestic capacity that is about 0.38 million tons.
Table Showing Thai Paint Production Capacity and Volume
Year /Production Capacity (Ton/Year) 1/
/Production Volume
(Ton/Year) 1/
/ Capacity Utilization Rate (%)1996 / 330,000 / 183,573 / 55.6
1997 / 330,000 / 181,321 / 54.9
1998 / 365,500 / 110,796 / 30.3
1999 / 374,000 / 120,488 / 32.2
2000 / 383,000 2/ / 151,914 / 39.6
2001 / 383,000 2/ / 153,500 / 40.0
2002 / 383,000 2/ / 168,500 2/ / 43.9 2/
Source: 1/ Industrial Funding Corporation of Thailand
2/ Estimated by Office of Industrial Economics
Paint and joint products industries have variable grown based on an economic growth. If the overall economy is good, the growth of paint industry is also good and vice versa.
In 2002, the capacity utilization of Thai paint industry has increased, compared to the previous year, due to an improved real estate business. It is resulted from the low interest rate that is an attractive factor to facilitate people to purchase their first houses in low price. In addition, the government has launched many policies such as the reduction of transfer fee from 2% to 0.01%, personal tax exemption for interests of housing loan up to Baht 50,000 baht (from, originally, Baht 10,000), and reduction of corporate tax from 3.3% to 0.11%. These policies decrease the burden of people and expedite the consumer’s decision-making in purchasing. Moreover, the huge growth of motor vehicle industry has favorably effected to the paint industry as well.
Import
Mostly, it is the import of industrial paint that is not produced domestically. In 2002, paint import into Thailand has increased by 6.15% from the previous year because of the increasing demand of industrial paint in motor vehicle industry, powder paint, and paint used for can coating (canned seafood industry), with the growth rate of 10 -15%. The main import sources are UK, Taiwan, South Korea, Singapore and Japan.
Export
Paint is the goods with high transportation cost so the export is rather low, only up to 10%-15% of the total sales volume. The main export markets of Thailand are in neighboring countries such as Burma, Cambodia, India, Hong Kong and Vietnam. In 2002, Thai paint export has increased by 20.92% because of the increasing demand from overseas markets, especially Malaysia, India and Vietnam.
Trend of Paint Industry in 2003
Paint industry in 2003 tends to improve since government measures stimulate real estate sector and low interest rate policy, resulting in sales growth of new house. Recently, the government sector has a project to build and sell houses for low-income people, first launch in August 2003, aiming that 1 million households will have their own houses in 5 years, given the budget of Baht 80 billion. The policies will effect to an increasing paint consumption rate as well as the increasing sales volume in motor vehicle industry. Moreover, the leading paint companies have continuously conducted a research and development of their paint products for better quality and diversified application. However, the tension and prospected war between U.S. and Iraq might affect the global economy, including Thai paint industry.
3. Cosmetic Industry
Industrial Structure
At present, there are plenty of cosmetic-producing entrepreneurs in Thailand and most of them are small and medium enterprises and 5-6 large scaled entrepreneurs. Operating capital of cosmetic producers consists of raw materials cost (20 – 40% of total cost, which each raw material is expensive and must be imported from overseas such as perfume and paint), packaging cost (approximately 50 – 70% of total cost), and other costs such as wages and salary, machinery depreciation expense and other overheads.
Import
Thailand, by large importers, imports high quality and famous cosmetics, which cannot be produced domestically for upper-classes target group. Raw materials, cost and marketing cost of such upper-classed products are totally different to that of medium and lower markets. In 2002, the import value of cosmetics increases by 10.15% from the previous year because of increasing domestic demand and continuous research and development for the diversity of products. The top import sources of cosmetics are U.S., Singapore and France, respectively.
Export
The main export markets of cosmetics are in Asian region, such as Philippines, Hong Kong and Indonesia respectively. In 2002, the export value of cosmetics increases by 13.25% compared to the previous year because of the increasing demand of overseas markets.
Trend of Cosmetic Industry in 2003
The production volume will increase because more entrepreneurs have invested in cosmetic business in 2002. The import also tends to increase, especially upper-classed cosmetic products. Export volume tends to increase and the major markets of Thailand are the Asian countries.
4. Chemical Fertilization Industry
Structure and Manufacturing Conditions
Chemical fertilizer industry is significant to Thai economy because Thailand is a agricultural country so chemical fertilizer plays an important role to the increase in productivity of agricultural sector. In 2002, there are about 100 fertilizer producers and sellers, of which there are 6 large entrepreneurs as follows: 1. Thai Central Chemical, Plc., 2. National Fertilizer, Plc., 3. Thai Fertilizer, Co., Ltd., 4. Jei-Tai, Co., Ltd., 5. Rojkasikij Co., Ltd., and 6. Kargils Co., Ltd. The rest are small enterprises, with production capacity of 4 hundred thousand tons per year, so the total capacity is approximately 4.1 million tons per year.
Table Showing Production Capacity, Production Volume,
and Capacity Utilization Rate of Chemical Fertilizer in Thailand
Year /Production Capacity (Ton/Year) 1/
/Production Volume
(Ton/Year) 1/
/ Capacity Utilization Rate (%)1996 / 1,700,000 / 820,100 / 48.24
1997 / 1,700,000 / 844,272 / 49.66
1998 / 4,200,000 / 1,842,362 / 43.87
1999 / 4,200,000 / 1,977,373 / 47.08
2000 / 4,200,000 / 1,930,000 2/ / 45.95
2001 / 3,430,000 2/ / 1,977,594 3/ / 57.66 3/
2002 / 4,100,000 2/ / 2,337,000 3/ / 57.00 3/
Source: 1/ Industrial Funding Corporation of Thailand
2/ Interview with entrepreneurs
3/ Estimated by Office of Industrial Economics
Form 1996 to 2002, the capacity utilization rate is approximately 50% of total production capacity. Most of the production requires the import of intensive fertilizer for mixing according to the formulas.
The consumption volume of fertilizer in Thailand varies by season. The domestic use of fertilizer is about 6 months a year, therefore, the entrepreneurs have to export in some months in order to reduce the inventory cost. In paddy farming season, fertilizer will be used greatly, while in winter it is slightly used due to off season. In addition, the domestic use of fertilizer has depended on other factors such as:
– If the price of agricultural products is good, more fertilizer will be used.
– Sources of loan, such as loan from the Bank for Agriculture and Agricultural Cooperatives (BAAC).
– Intervention of government in encouraging the fertilizer used by agriculturists.
– Planting support policy of Village Fund.
However, currency exchange rate is one of the most important factors affecting the price of fertilizer because manufacturers have imported the intensive fertilizer for mixing from overseas such as Saudi Arabia, U.S., Canada and Germany.
Manufacturing conditions of fertilizer in 2002 is nearly the same compared to the previous year because of both positive factor that is good agricultural products price in line with economic conditions and negative factor that is flood in many areas. These factors have resulted in the stable production of fertilizer.
Import
In 2002, the import value of chemical fertilizer has slightly increased by 0.69% compared to the previous year because the National Fertilizer Co., Ltd. has faced the financial liquidity problem so the company is unable to produce fertilizer to sufficiently meet the market demand. As a result, some domestic fertilizer trading companies have to import more. Besides, some import is a purpose of re-export to other countries.
Export
In 2002, the export volume of chemical fertilizer has increased by 61.68% compared to 2001 because of the increasing demand of overseas markets and market expansion. The main export markets are in Southeast Asia region such as Indonesia, Cambodia, Lao and Burma, etc.
Trend of Chemical Fertilizer Industry in 2003
The trend of manufacturing conditions of chemical fertilizer in 2003 is expected to improve because of the higher price of agricultural products. Moreover, the government launches some policies, such as Farmer Suspending Debt Project, to help and motivate agriculturists in different provinces to spend more after the flood in 2002 that damaged the agricultural areas and products. Such reason causes a higher demand for fertilizer in 2003. However, the competition in this industry is quite severe due to many manufacturers and distributors, and competition with imported fertilizer, therefore, some manufacturers have to focus on overseas market. Production cost still remains at high level because of the dynamic fluctuation of oil price affecting the production cost.
Development Strategy of Chemical Industry
1. To improve regulations, procedures and laws underlying problems and obstacles of the industry to the demand.
2. To adjust import and export duties in order to strengthen the entrepreneurs.
3. To prepare seminar and training to instill concepts and operating procedures about Value Chain in order to create the cooperation for continual industrial development.