GEORGE TOWN: SLP Resources Bhd’s plans to ship flexible plastic packaging materials to meet the demands of the 2020 Tokyo Olympics may be disrupted because of the novel coronavirus (Covid-19) outbreak.
Group managing director Kelvin Khaw told StarBiz that the group was producing 500 tonnes of plastic flexible packaging materials for the 2020 Tokyo Olympics market.
“The shipment will have an estimated value of about US$1mil, based on today’s market price of resin hovering around US$850 per tonne and US$1,000 per tonne, depending on the grade.
“We plan to ship out in June and the cargo should arrive on schedule in July but with the outbreak of Covid-19 in Japan, the venue may be changed. We will know by the end of April whether the 2020 Tokyo Olympics is still on, ” he said.
According to Khaw, Japan is an important market that contributed about 40% of the group’s revenue in 2019.
“Last year, we shipped about some 6,500 tonnes to Japan, which had a value of US$40mil. This year we expect to ship 7,000 tonnes to Japan. Importers from Japan, Australia, and New Zealand are turning to South-East Asia to buy because of the coronavirus outbreak in China. This is why we expect our sales to improve in the first half.
“The price of resin has also stabilised at around US$850 per tonne, and we are now seeing more purchasing activities in the market.
“In the final quarter of 2019, resin prices softened to about US$750 per tonne. When resin prices come down, customers of resin manufacturers and our customers will delay their orders, as they believe the price of raw materials and plastic packaging products will drop even further, ” Khaw said.
According to Khaw, the group expects polyethylene price to shrink further by 5% to 10% in the short to medium term.
“Between 2022 to 2024, an additional 4.5 million tonnes of resin supply will kick in. The MNCs in Texas started expanding its production capacity in 2015. The expansion is almost completed, and the new supply is expected to come in next year.
“Because of the trade war, China is now cut off from the US resin supply.
“So, the US resin producers will look to South-East Asia to sell, triggering resin prices to spiral downwards, ” he said.
For the financial year ended Dec 31,2019, the group posted a net profit of RM21.2mil on the back of an RM166.8mil turnover, compared with RM25.2mil and RM188mil achieved in 2018.
Despite 2019’s sluggish growth, Wood Mackenzie expected Asia’s flexible packaging market to make up 50% of the global market within the next five years.
“The issue of plastic waste and sustainability will continue its momentum through 2020 and beyond.
“While flexible packaging usage in the region is still expected to grow significantly, local legislators will need to find the right way to balance this growth with an effective environmental agenda.
“We expect the flexible packaging market in Asia to reach US$52.1bil by 2024. Short-term disruptions due to the impact of the coronavirus are possible in the coming months but it is unlikely that the outbreak will impact long-term flexible packaging trends across the region, ” said Wood Mackenzie analyst Brendan Connell-French.