The current development in Southeast Asian polyurethane downstream markets bears some similarities to the boom in China fifteen years ago. This similarity is evident not only in the growth of market size but also in many consumer habits and market requirements. Therefore, Chinese businesses can leverage past experiences when expanding into this region. For example, successful strategies in the Chinese upholstered furniture market, such as expanding production lines, exploring new markets, and developing online business, can be appropriately applied to the Southeast Asian market. These strategies are equally feasible in exploring markets such as refrigerators and freezers in Southeast Asia. Particularly, refrigerator and freezer manufacturers can consider the development paths in third and fourth-tier cities in China, as these regions share similarities with the Southeast Asian market in terms of economic development stages and consumption patterns, providing valuable insights for businesses in their market positioning.
Southeast Asia is experiencing strong and steady growth though varying economic development levels across countries. Singapore leads the region with an economic development level surpassing that of China, while Malaysia is roughly on par with China. Indonesia, Thailand, the Philippines, and Vietnam, among others, are at development stages roughly equivalent to China’s economic levels from 2005 to 2015. Indonesia, as the country with the largest population and economy in Southeast Asia, showed a 5% year-on-year GDP growth in 2023, demonstrating positive development momentum. Thailand, as the second-largest economy, also achieved a 2% GDP growth in the same year. Vietnam is also rapidly developing, with a GDP growth reaching 6.4% in the first half of 2024, where the service sector grew by 6.6% and the manufacturing sector saw a remarkable 8.7% increase. Its GDP grew by 5% year-on-year in 2023.
Nevertheless, growth opportunities are always accompanied by challenges. The region’s current dependency on imported polyurethane raw materials makes fluctuating freight shipping costs significantly impact their CIF prices of materials, thereby increasing cost risks for businesses. Moreover, the U.S. antidumping duty (AD) policies on mattresses have gradually extended to the entire Southeast Asian region. Between 2020 and 2023, the U.S. initiated AD investigations on mattresses imported from various Southeast Asian countries, including Thailand, Vietnam and Cambodia, putting immense pressure on these countries’ mattress exports. As many Chinese companies are expanding their operations into Southeast Asian countries and competition intensifies, the price of polyurethane raw materials becomes the primary consideration for downstream manufacturers, as opposed to brand reputation.
Despite facing numerous challenges, the driving factors in the Southeast Asian market are equally compelling. Southeast Asia’s economy is projected to continue growing steadily in the next five years, indicating a huge growth potential for the polyurethane industry. Besides, free trade agreements between Southeast Asian countries and various nations significantly expand export markets for polyurethane downstream products, thereby boosting demand for their raw materials. The Southeast Asian region boasts a large population and low labor costs. Governments across these countries are actively promoting economic development through various policy measures, such as reducing import tariffs, granting tax exemptions to businesses, constructing public EV fast-charging stations and attracting foreign investments to facilitate the rise of the local new energy vehicle industry. These driving factors have all contributed to the development of the polyurethane industry.
