LONDON: Singapore’s petrochemical shipments abroad are likely to remain weak this year, tracking the overall decline in non-oil domestic exports (NODX), underscored by sluggish oil prices and demand, as well as the slowdown in trade to primary market China, analysts said. The southeast Asian country’s annualised NODX to China has been contracting over the past three successive quarters, with March-quarter 2016 shipments down 14.6% year on year, according to International Enterprise (IE) Singapore.
Shipments to China made up close to 14% of overall NODX, making it the largest export destination of the country in the first three months of this year, IE Singapore data showed. For the whole of last year, Singapore’s NODX to China, which includes pharmaceuticals and petrochemicals, fell by 6.4% year on year. “We doubt that export conditions will improve significantly over the coming quarters, and the domestic economy will be held back by rising interest rates, fading fiscal support and weakening real wage growth,” Capital Economics said in a note.
Singapore’s non-oil domestic exports (NODX) are expected to contract between 3.0-5.0%, revised from a growth forecast of between 0.1-1.0%, while 2016 total trade is seen to shrink 6.0-8.0% against an earlier forecast of a 0-2.0% growth, IE Singapore said on Thursday. “Growth momentum in the US economy has slowed in recent months, while the Chinese economy is projected to ease further in 2016,” IE Singapore said.
“Moreover, persistently low oil prices are expected to continue to dampen oil trade in nominal terms,” the agency said. Singapore’s petrochemical exports in the first quarter fell by 12.9% year on year due to lower shipments of basic chemicals, after registering a full-year 2015 contraction of 14.9%, official data showed.
Exports this year have been partly weighed by prolonged shutdown of Shell’s cracker on Bukom Island. The cracker, which has an ethylene capacity of 960,000 tonnes/year, has been shut since December 2015. First-quarter 2016 NODX declined 9.0% year on year, steeper than the 3.5% contraction recorded in the previous three months, as both electronic and non-electronic NODX shipments fell, it said.
Non-electronic NODX, which includes pharmaceuticals and petrochemicals, fell by 11.3% year on year from the 4.3% contraction in the previous quarter, it said. “[Overall] Exports to China have been falling and that has been the main drag on overall export performance,” Singapore-based DBS Group Research said in a note.
“In addition, the slowdown in China is structural in nature. And that suggests that the current NODX weakness may persist for a while,” it said. China, which is the world’s second-biggest economy and a major importer of petrochemicals in Asia, has been steadily slowing down over the past five years. Singapore’s NODX performance in the medium term “is still a weak one and we should expect NODX to clock in few more contractions in next few months although we are not looking for double-digit declines”, according to Alvin Liew, economist at Singapore’s UOB Global Economics & Markets Research.
