Industrial Costs May Remain Elevated, Warns SCG Chief
Thammasak Sethaudom, Chief Executive of SCG, has issued a stark warning that industrial operating costs could remain high if current geopolitical instability persists through September. He indicated that a continued lack of resolution in ongoing conflicts could significantly impact global oil reserves, directly affecting businesses across various sectors.
“The peace talks have yet to reach a final conclusion, so there is still risk for global energy prices, crude oil and petrochemical raw materials such as naphtha,” Sethaudom stated. This assessment comes in the wake of a memorandum of understanding signed between Washington and Tehran aimed at de-escalating hostilities involving the US-Israel alliance and Iran, including efforts to cease fighting in Lebanon.
Strait of Hormuz Under Threat
However, recent escalations, including renewed clashes and Israeli military actions in Lebanon, have reportedly prompted Iran to reconsider its stance on the Strait of Hormuz. This vital maritime route, which had only recently reopened, is a critical artery for global energy transport. Prior to the current conflict, approximately 20% of the world’s oil and liquefied natural gas shipments transited through the strait.
Supply Chain Disruptions Impact Operations
SCG has already experienced the repercussions of these supply chain vulnerabilities. The company was compelled to temporarily suspend operations at its Long Son Petrochemicals facility in Vietnam and its olefins plant located in Rayong, Thailand. These shutdowns were a direct consequence of disruptions in the shipment of essential raw materials.
Sethaudom expressed optimism that both facilities could resume operations in the third or fourth quarter of the current year. To proactively manage and mitigate future risks, SCG is actively pursuing a strategy of diversifying its raw material procurement. Currently, more than half of its imported materials originate from regions outside the Middle East, with significant sourcing now coming from the Americas and Africa.
Expanding Market Reach and Partnerships
In parallel, SCG is accelerating its exploration of strategic partnerships with Chinese companies. This initiative aims to capitalize on the expansive market opportunities within China. The influx of Chinese imports, which now constitute around 20% of products in the Southeast Asian market, has demonstrably intensified competition for regional manufacturers, including SCG.
“SCG plans to be partners with Chinese companies, and we want to export our products there,” Sethaudom explained. He further highlighted that SCG’s established manufacturing presence across Thailand, Vietnam, and Indonesia provides attractive entry points for Chinese investors looking to access the Southeast Asian market.
SCG’s business portfolio also includes a significant packaging division.
