10 minute read
Thailand’s chemical industry is shifting towards more specialised production
Frank Malerius
Thailand has built up a diversified chemical industry, but global overcapacity is now forcing specialisation. Pharmaceutical production, in particular, needs to be strengthened.
MARKET TRENDS
Global overcapacities are intensifying competition in Thailand, and without investment in higher-value products this key industry could lose its competitive edge.
Thailand’s chemical industry was expanded gradually, over time, with government support following the oil price shocks of the 1970s. Since then, it has developed into one of the leading chemical manufacturing centres in Southeast Asia, but growth rates in this volatile industry fluctuate considerably.
In 2024, production grew by almost 3 per cent, after two years of contraction, but the outlook for 2025 appears challenging. Global overproduction and low world market prices are impacting the Thai chemical industry as well, and now it must overcome the current downturn without government support. A manager at a German chemical company notes that the Thai government is now redirecting resources to more high-profile sectors such as automation and robotics.
STRONG PETROCHEMICALS
The heart of Thailand's chemical industry is the petrochemical sector, which ranks among the 20 largest in the world. It is concentrated in the Map Ta Phut cluster in Rayong province, and its production capacity stands at 37 million tonnes per year. Compared to other Thai industries, the sector is highly productive and generates by far the highest economic output per employee.
The petrochemical industry is well integrated into both domestic and international supply chains, and spans the entire production process. It processes oil and gas into numerous intermediate products, which are later used to manufacture plastics, paints, fertilisers, cosmetics, and pharmaceuticals. intermediate products, which are later used to manufacture plastics, paints, fertilisers, cosmetics, and pharmaceuticals.
Nearly 60 large petrochemical companies are located in Map Ta Phut. In addition to refiner ies, the industrial park also includes power plants, steel plants, and a chemical port. The Map Ta Phut deep-sea port is currently undergoing a third phase of expansion and will include additional terminals and storage facilities for gas and liquids.
Thai refineries produce, among other things, naphtha (a petroleum-derived feedstock), which accounts for 70 per cent of the raw materials used in the upstream industry. Upstream producers use it to manufacture basic chemicals, 80 per cent of which are subsequently supplied to local manufacturers of intermediate and downstream products. More than half of these products are primarily exported to China and other Southeast Asian countries.
The most important domestic end users of petrochemical products are companies in the packaging sector (38 per cent), followed by the textile industry (18 per cent), the automotive sector (12 per cent), and the electronics industry (11 per cent).
RISKS ARE INCREASING AND NEW STRATEGIES ARE NEEDED
The domestic petrochemical industry has been on a modest upswing since spring 2025, following a difficult year in 2024. However, one key risk lies in US tariff policy. This could result in Chinese chemical companies shifting surplus production to Southeast Asia, exerting further downward pressure on prices in the region. Domestic suppliers may be forced to move into niche markets such as packaging, medical applications, or electronics.
In light of ongoing stagnation, the industry is seeking to shift towards higher-value and more innovative production. This is driving increased investment in areas such as specialty chemicals and bioplastics. Analysts at Krungsri Bank also expect that an increasing number of chemical companies will focus on producing higher-value specialty products, including bio-based plastics, for which demand is expected to grow significantly.
Thailand has abundant supplies of plantbased raw materials such as sugarcane, cassava, maize and wood, and several initiatives are already underway to utilise them. In Rayong, the Netherlands-based company TotalEnergies Corbion, for instance, produces bioplastics (polylactide; PLA)
GROWTH EXPECTED IN UNDERDEVELOPED PHARMACEUTICAL SECTOR
One weakness of the Thai chemical industry is pharmaceutical production, which predominantly produces simple generic drugs. More sophisticated drugs must be imported annually, worth between US$3 billion and US$4 billion. The most important suppliers of imported pharmaceuticals are Germany, the United States, and China.
These imports are offset by pharmaceutical exports worth only US$600 million to US$700 million, and 90 per cent of Thai production is destined for the domestic market. To overcome this weakness, new pharmaceutical manufacturers are expected to establish themselves. The development of this sector is part of the current five-year macroeconomic plan, entitled the National Economic and Social Development Plan 2023 to 2027.
The Board of Investment (BOI), a government agency, approved a total of 224 foreign investment projects in the chemical and petrochemical industries in 2024. These projects have a total value of US$1.8 billion. In addition, there are 32 foreign pharmaceutical projects worth US$200 million. The BOI generally encourages investments in high-quality manufacturing, and investors receive tax exemptions of three to eight years, as well as other privileges.
TRADE DEFICIT INCREASES
Thailand imported chemical products worth US$30.2 billion in 2024, and the largest import categories were plastic products and industrial chemicals. Since 2014, the chemicals industry has been running a foreign trade deficit, which continues to grow. In 2024, it amounted to US$4.4 billion, the second-highest figure after 2022. About half of the deficit is attributable to pharmaceutical imports. There is also a significant deficit in fertilisers, with China and Saudi Arabia being the most important suppliers.
INDUSTRY STRUCTURE
The petrochemical industry is predominantly state-owned. However, German companies also manufacture a wide range of chemical products in Thailand.
Thailand has a large and well-developed chemical industry. It offers a well-integrated industrial sector, from oil and gas processing to the production of intermediates and final products. According to a ranking by the German Chemical Industry Association (VCI), the Thai chemical industry generated sales of €29.7 billion in 2023 (€32.3 billion including the pharmaceutical industry), making it the fourth largest in ASEAN, behind Indonesia, Singapore, and Malaysia
According to the Department of Industrial Works, part of the Ministry of Industry, there are 3,000 chemical plants in Thailand employing 125,000 people. In addition, there are 1,200 plants in the upstream oil and gas industry with a further 18,000 employees. After the food and electronics industries, the chemical industry, including pharmaceuticals, is the third largest industry in the country.
STATE-OWNED OIL AND GAS PROCESSING
Thailand’s chemical industry is based on oil and gas processing, which, as previously mentioned, is still largely state-controlled. The largest market player is PTT Global Chemical, along with its subsidiaries ThaiOil and IRPC. The PTT Group’s subsidiaries cover a broad product range, including speciality chemicals.
The conglomerate Siam Cement Group (SCG) is also active in the petrochemicals industry, and is currently expanding its capacity and constructing a US$5.4 billion petrochemical complex in Vietnam. SCG had originally planned to list its chemicals division on the stock exchange in 2023, but these plans were cancelled due to a weak market response.
STRATEGIC INVESTMENTS ABROAD
Due to global overcapacity, rising competition, weak demand, and falling prices, Thai chemical companies are investing less in new production capacity. Instead, they aim to strengthen their presence in the production of high-performance and innovative products at the end of the value chain. This also involves acquisitions.
In January 2022, PTT Global Chemical acquired the Frankfurt-based speciality chemicals company Allnex, which produces coating resins and additives. With this acquisition, the group is responding to growing demand for high-performance and environmentally friendly coating solutions. According to press reports, the purchase price was €4 billion, the largest foreign acquisition by a Thai company since 2012.
Indorama Ventures claims to be the world’s largest producer of polyethylene terephthalate, operating 148 chemical plants in 35 countries. The company now plans to reduce costs and divest assets, particularly in Europe. Thailand’s largest paint producer, TOA Paint is focusing its expansion efforts on neighbouring Southeast Asian markets, where demand for paints in the construction and industrial sectors is currently rising. Other local paint and coatings manufacturers include AkzoNobel, Jotun, and Sika.
GERMAN CHEMICAL COMPANIES ARE ALSO DRAWN TO THAILAND
Thailand hosts Dow’s largest operations in Asia, and the Dow Thailand Group, together with SCG, operates 13 petrochemical plants with a total capacity of 2.1 million tonnes. Both companies are also involved in plastics recycling.
German chemical companies also manufacture a wide range of products in Thailand. BASF produces polyurethane, coatings, care chemicals, and construction chemicals, while Covestro produces polycarbonate, engineering plastics, and speciality films, primarily for export. Evonik manufactures silica and hydrogen peroxide for the local market and international customers, and Beiersdorf produces personal care products. Henkel produces adhesives and cosmetics, while Linde produces industrial gases, and Bayer produces crop protection products.
According to the Bundesbank, as many as 23 German chemical companies were active in Thailand in 2022. They employed approximately 4,000 people and generated sales of €3.2 billion. This means that compared to 2021, two more German chemical companies started operations in Thailand, while others expanded their facilities. As a result, combined sales increased by about 25 per cent. According to a VCI member survey from November 2024, German chemical companies cite Thailand as a potential site for diversification beyond their US operations.
FRAMEWORK
Thailand's regulations for the handling and labelling of chemicals are aligned with international regulations. Several authorities are responsible for hazardous substances.
In Thailand, the Hazardous Substances Act (1992) is one of the key regulations for the chemical industry. It regulates the import, manufacture, marketing, and possession of hazardous chemicals such as industrial chemicals, pesticides, and biocides. The Act contains six schedules that list various hazardous substances and the relevant authorities.
RESPONSIBLE AUTHORITIES FOR THE CHEMICAL SECTOR
1. Hazardous substances in industry: Department of Industrial Works
2. Hazardous substances in agriculture (pesticides, etc.): Department of Agriculture
3. Hazardous substances in fisheries and aquaculture: Department of Fisheries
4. Hazardous substances in livestock production: Department of Livestock Development
5. Hazardous substances in households and healthcare: Food and Drug Administration
6. Hazardous substances in petroleum products: Department of Energy Business
HANDLING OF HAZARDOUS SUBSTANCES IS STRICTLY REGULATED
The lists and regulations governing the handling of hazardous substances are regularly updated. The Department of Industrial Works (DIW) adapts the list and procedures upon request, for example, to comply with the requirements of the International Stockholm Convention on Persistent Organic Pollutants.
Depending on the product, labelling requirements exist that correspond to the International System of Classification and Labelling of Chemicals (Globally Harmonised System of Classification and Labelling of Chemicals; GHS). Thailand implemented GHS classification for substances in 2012, and for mixtures in 2017.
The Thai Industrial Standards Institute provides information on the required standards for chemical products. Service providers such as TÜV Rheinland, TÜV Nord, and TÜV Süd support companies locally with compliance and implementation.
NEGOTIATIONS ON A FREE TRADE AGREEMENT WITH THE EU
The import of highly toxic chemicals requires a permit, and permits are issued by the Department of Industrial Works (DIW), including online. The Thai Customs Authority provides information on current import duties, while the GTAI also provides detailed information on commercial and tax law, as well as import regulations, customs duties, and non-tariff barriers to trade.
Thailand is a party to 14 free trade agreements, all of which have been notified to the WTO. The kingdom is also one of the founding members of the 2020 Asia-Pacific Regional Comprehensive Economic Partnership Agreement (RCEP).
European suppliers of chemical products hope for the swift conclusion of a free trade agreement between the EU and Thailand. In September 2023, both sides resumed negotiations which had been suspended for political reasons in 2014. The fifth round of negotiations took place in Brussels in March 2025, but whether the negotiations will be concluded by the end of 2025 remains to be seen.
Contact details:
Frank Malerius
Director Thailand, Cambodia, Myanmar and Laos
German Trade & Invest (GTAI)
Note: Tables about investments and suppliers are available in GTCC UPDATE's pdf version only.
