Taiwan's petrochemical industry was born only a few years ago but has quickly reached the first stage of maturity. The biggest milestone yet has been passed with dedication of the US$9.5 million naphtha pyrolysis plant of the government-owned Chinese Petroleum Corporation and the US$15 million polyethylene (PE) plant of the USI Far East Corporation, a wholly owned subsidiary of the National Distillers and Chemical Corporation of America.
Completion of the two plants at the same time was no accident. They are interdependent. Of the CPC plant's production of 120 million pounds of ethylene annually, 77 million pounds will be piped to the USI plant and become the raw material for 72 million pounds of low density polyethylene, the most widely used of plastic primers. An additional 43 million pounds will be delivered to the Taiwan Alkali Company for processing into ethylene dichloride and become the raw material for Taiwan PVC processors.
These plants constitute the core of the southern sector of Taiwan's petrochemical industry. Both are located at Kaohsiung, the island's second largest city and principal port. A northern petrochemical complex is growing up around CPC's natural gas fields. With gas as the raw material, ethane will be processed into ethyne and then into ethylene dichloride and styrene. The first phase of the northern investment will cost US$20 million, most of it to come from CPC earnings.
Until this year, some 300 Taiwan plastics processors have been largely dependent on expensive imported raw materials. The CPC naphtha plant is the first big step toward domestic production of primers. This will lead to the processing of intermediates and then to the manufacture of additional finished products.
Most prominent among the primers are aromatic hydrocarbons, natural gas and ethylene. Taiwan's first primers came from the CPC's solvent works at Chiayi in central Taiwan. This facility was completed in 1959 and has annual capacity of 2,000 kl of benzene, 4,000 kl of toluene and 1,500 kl of xylene. Ultimate products are DDT, detergents and solvents. Demand already has outrun supply. A new aromatic hydrocarbons plant will produce 16,000 tons of benzene, 24,000 tons of toluene and 25,000 tons of xylene.
Besides the ethylene, the CPC naphtha installation will produce 55.8 million pounds of propylene and 21.7 million pounds of butene and butadiene. Counting only the ethylene, Taiwan's foreign exchange balance will be given a boost of between US$6 and US$7 million. Exports will earn US$3 million and imports of plastic raw materials, which have been costing in excess of US$13 million annually, can be reduced by between US$3 and US$4 million.
National Distillers and Chemical Corporation first became interested in the Republic of China's investment opportunities in the early 1960s. In 1964 the American company acquired a 40 per cent interest in the Federal Plastic Manufacturing Company (Taiwan) Ltd., which now is making more than a million pounds of polyethylene flowers and other injection molded products a year, mostly for the U.S. market. NDCC finally decided to build the polyethylene plant. Part of the funding was with the largest Cooley loan the U.S. Agency for International Development has yet made in the Far East. Cooley loans are made from local currency holdings of the U.S. government.
USI Far East Corporation will become partly Chinese-owned after three years of operation. The parent company has announced that beginning in 1971, a 15 per cent interest in the polyethylene plant will be offered to Chinese investors annually up to a total of 50 per cent. NDCC President W. P. Marsh Jr. said of this investment provision: "We feel that it is of great importance to the future success of our venture to have significant local ownership and we are pleased indeed that this provision is built into our arrangement in Taiwan."
National Distillers and Chemical Corporation is one of the three biggest polyethylene producers in the United States and has branch offices, sales representatives and service centers throughout the Far East. An extensive feasibility study was conducted in the East Asian area before the decision to locate the polyethylene facility in Taiwan. Mr. Marsh said Taiwan was selected because "We knew that we would find here available local resources, a growing market and perhaps most important, the dedicated and hard-working people essential to the success of a business such as ours".
As for the future of the polyethylene plastics' industry in Taiwan, Mr. Marsh said:
Petrothene is USI trade name for polyethylene resin (File photo)
"First of all, our new production facility will have a decidedly beneficial effect in foreign exchange savings for Taiwan. USI Far East Corporation opened a Technical Service Laboratory in Taipei in September, 1966, to assist local plastic converters to develop new applications for polyethylene, to aid those wishing to enter the plastic conversion business to acquire the necessary know-how, to help members of the Taiwan industry to train and upgrade the skills of their technicians and, through the provision of laboratory facilities, to enable them to test their output and improve the quality of their production."
Vice President and Prime Minister C. K. Yen saw other benefits. He said: "The scientific methods of modern management and technology employed by these plants will be followed in other industries here. One fact is worth special mention. While still in the process of planning, the USI Far East Corporation became aware that the changes taking place in the market then were more rapid than previously envisaged. Accordingly, the company revised its construction plans. By expanding its production capacity, using the latest techniques and increasing its production of more sophisticated products, the company is now in a better position to meet the needs of the economy. It is still planning to expand its line of production. This spirit of dedication to research and development is exactly what we want to promote in order to expedite the process of industrialization. I think this is a good example for all entrepreneurs in the country."
U.S. Ambassador to China Walter P. McConaughy viewed the cooperative development of Taiwan's petrochemical potential as an outstanding example of sound international relations. He said: "The management and ownership of CPC's ethylene plant, and the technical supervision which built it, are wholly Chinese; the equipment is mainly American supplied and financed (with a US$5.4 million loan from the U.S. Import-Export Bank). The capital and technology for USI's polyethylene plant are furnished by its American parent, National Distillers and Chemical Corporation; USI's management is largely Chinese. Certainly Taiwan industry will profit from this technological relationship with National Distillers and its extensive research facilities. Undoubtedly, too, both Chinese and American consumers will benefit from the multiplicity of new products for Taiwan consumption and for export that are supplied by this plant."
Ambassador McConaughy went on to say: "Without doubt, this USI plant will stimulate the production of a wide variety of products which will help Taiwan businessmen to find new export markets. For example, it will be used in the proper wrapping and packaging of Taiwan food and manufactured products. The importance of modernized packaging to successful export marketing can hardly be overemphasized. Wrapping to deliver the product in good condition and packaging of attractive design are essential today in selling products in increasingly sophisticated markets. I am confident that this joint effort of USI and CPC will make solid direct and indirect contributions to the Republic of China's foreign trade."
Minister of Economic Affairs K. T. Li expressed belief that the plants would not only mark the starting point of the petrochemical industry but also would be "the main objective of our policy for the development of an advanced industry". He said: "Petrochemicals provide an important raw material for industry and can also play a vital part in our defense and our daily lives. Since we have entered the field rather late in the day, we must take every opportunity to seek new techniques for the best employment of this highly versatile industry in order to keep pace with other countries. We hope this good start will attract more and more private and foreign investment and technical cooperation so that the development of a full petrochemical complex will be expedited."
USI's Customer Service Laboratory in Taipei is the first such installation in the Far East. With a highly trained staff and the newest instrumentation, it has already provided valuable counsel in the packaging of bananas and the growing of mushrooms, two of Taiwan's most important export products.
Most bananas are sold to Japan. This means a trip to port, a period of waiting in warehouses, several days at sea and frequent unloading delays. Spoilage rates have been high. Now Taiwan bananas face increasing competition from Latin American varieties and the Philippines and Thailand also are looking toward the Japanese market, which is worth some US$60 million a year to Taiwan.
Polyethylene packaging developed at the USI laboratory can cut losses sharply by trebling storage life. Additionally, PE shrouding of trees may improve winter crops and reduce storm damage. Spoilage cost ran to a tidy sum of US$5 million last year. Rain and wind did US$15 million worth of damage in four hours last February. Plastic packaging also may enable growers to cut bananas when they are riper; they are now harvested when only 80 per cent mature. Evaporation loss during shipment will be reduced. Sales to New Zealand, Australia and even Europe may become possible.
Taiwan bananas traditionally have been packed in bamboo baskets with cardboard liners. According to C. Y. Lin, head of the USI laboratory, whole shipments may be lost through the use of such packaging. The packs are not airtight. If one banana is scratched, bacteria can spread through case after case. He said PE bags would eliminate the 3 per cent loss of weight due to evaporation, slow ripening, preserve even coloring, raise prices to the market maximum and extend storage life by from 7 to 10 days. Even in the store, PE wraps will keep the banana attractive for an additional day.
The PE packs are placed inside cardboard cartons, which already have been approved for Taiwan shipments. Bamboo baskets will be gradually phased out over the next three years. In an experimental shipment, 400 cases (45 kilos) of bananas wrapped in PE went to Japan along with fruit packed in the bamboo baskets. Scratch damage to the plastic-wrapped bananas was nil and they brought an average of 5 per cent more in the Japanese market.
Aerial view of USI Far East plant at Kaohsiung. This represents the single biggest American investment in Taiwan to date. Part of stock will be sold to Chinese investors (File photo)
If the PE shrouds can increase production of winter bananas, that will be a big help in retaining the Japanese market. Taiwan's best bananas are grown in the Kaohsiung area and harvested in the summer and fall. Bananas from Taichung go to market in the winter and spring and are of poorer quality. Japanese traders asked for suspension of Taichung shipments this year. The laboratory experiments hint that Taichung quality can be markedly improved with use of polyethylene.
Canned mushrooms are earning more than US$30 million a year in exports. Technicians of the USI laboratory say PE can be used in the construction of mushroom houses and beds with a saving of money and an increase in production. Tests carried out on government experimental farms indicate crop yields can be increased by up to 100 per cent, cultivation time can be reduced as much as half and crop losses due to climatic change and bacterial infection can be mitigated. The quality and appearance of the crop is raised and the time needed for mushroom house and bed construction shortened.
Up to now mushrooms have been grown in structures and beds made of clay, bricks, bamboo, straw and sugar cane waste. The houses are difficult to keep clean and may carry over injurious bacteria from one crop to another. They last only three years and afford poor humidity and temperature control, In northern Taiwan, mushrooms must be protected from temperature fluctuations from November to April.
PE houses can be built in half a day. They help retain moisture in the beds while keeping out unwanted water. Warmth is assured in northern Taiwan's cool winter. The transparent PE sheets permit the farmer to keep watch on the growth on each bed. Non-toxic, the film does not hurt the crop, is easily sterilized and can be used again and again. The price is low: only US 12½ cents for 36 square feet that will remain serviceable for three years or longer.
USI Far East's staff is all-Chinese. The general manager is Antonio Chong, an American citizen and the only senior employee of that nationality. He has a master's degree in chemical engineering from the University of California and is widely experienced in polyethylene engineering, technology, production, sales and management. Edward Tan, a Yale graduate in electrical engineering who also holds a degree from the Columbia University Graduate School of Business, is assistant general manager. Most senior staff members have received training at NDCC plants in the United States.
The northern petrochemical complex will depend on natural gas rather than liquid petroleum. Output of natural gas has climbed from 50 million cubic meters in 1963 to more than 527 million meters in 1967 and the latter figure soon will be doubled. Principal users of natural gas to date are Mobil China Allied Chemical Industries Ltd., which puts CPC in partnership with one of the United States' big oil companies, and the Chang Chun Petrochemical Co. Ltd. At Miaoli, the Mobil China plant makes anhydrous ammonia and urea. Chang Chun makes methanol and a sister company, Chang Chun Plastics Co. Ltd., produces phenolic molding powder and glue, urea, melamine, resin molding compound, urea resin glue and formaldehyde.
Taiwan's natural gas deposits are believed sufficient for at least 20 to 30 years. About half of the predicted reserves have not yet been located. CPC geologists are searching for oil as well as gas. Small quantities of oil have already been found and exploited but they are lacking in commercial importance. The oil used in the CPC naphtha plant is shipped from the Middle East in crude form and refined at Kaohsiung.
The Chinese Petroleum Corporation is one of Taiwan's biggest businesses with a volume of around US$100 million a year. A part of its fuel and lubricants output is exported to other East Asian countries. Research is one of CPC's strong points. Now under study is the development of low-cost protein from petroleum. CPC scientists have used micro-organisms to bring about the transformation and have fed the protein to poultry and pigs with excellent results. Growth and health are equivalent to those of animals fed with natural proteins. CPC's ultimate objective is a protein fit for human consumption. With atmospheric pollution expected to banish the gasoline engine in ground vehicles within the foreseeable future, the world's remaining petroleum might be used to provide an adequate supply of food for the additional billions of people who will throng the earth in the next few generations.
Plastics also serve the masses of the people in the form of a thousand and one low-cost daily necessities and household articles. Many scientists assert the plastics revolution has only begun. The first plastics manufacturing plant in Taiwan was established in 1957 and had capacity of only 4 metric tons of polyvinyl chloride daily. Production increased to 110 metric tons. Three other plants now have a combined output of 100 metric tons a day. Expansion to a total of more than 500 metric tons is expected by 1975 to meet the increasing domestic and export demand. Current volume is about US$40 million annually, with half for sale overseas.
As Vice President Yen put it, "Petrochemistry is the wonder of the modern chemical industry. Statistics show that in 1965 organic petrochemical products accounted for 80 per cent of all organic chemical products. By 1985, these same statistics tell us, organic petrochemical products will amount to 440 billion pounds, or 98 per cent of all organic chemical products."
Opening of the CPC and USI plants at Kaohsiung give indication that Taiwan will not be found wanting when the magic of petrochemicals is making this a much more comfortable world.