As a punishment for a recent fire incident, Yunlin County government ordered last Friday (May 27) shutdown of Formosa Plastics Group`s two plants in Mailiao offshore industrial zone starting from June 1, including an EG plant of Nan Ya Plastics, which accounts for 90% of the domestic market.

The shutdown of the EG plant will affect the operation of domestic polyester factories, such as Tainan Textile, in the third quarter, and as well as factories in a wide range of other downstream sectors, including PET bottle, computer cases, and shampoo.

The EG plant boasts annual capacity of 1.8 million metric tons, compared with the domestic consumption of 1 million metric tons. Its shutdown may force Formosa Petrochemical to suspend the upstream production of 1.26 million metric tons of ethylene annually.

Major downstream products of EG include polyester filament and polyester staple fiber. The shutdown of the Nan Ya EG plant will force downstream polyester makers to slash output by 540,000 metric tons annually and will boost EG prices on the spot market, as Nan Ya is the world`s fourth largest EG supplier.

Institutional investors pointed out that the extent of the influence of the shutdown will hinge on its length. In the short term, the influence will be limited, since the polyester industry is stepping into off season but with the prolonging of the shutdown, the influence will become increasingly evident.