China’s cheap exports are ‘a fact of life,’ Siam Cement Group’s CEO says - so Southeast Asia’s factories need to get bigger

Chinese overcapacity is “a fact of life,” and Southeast Asia’s manufacturers must build plants big enough to sell across the whole region or get priced out, the CEO of Thai industrial giant Siam Cement Group said Tuesday.

“If you look at the current situation, we are facing overcapacity from mainland China,” Thammasak Sethaudom, president and CEO of SCG, said onstage at the Fortune Southeast Asia 500 Summit in Ho Chi Minh City on Nov. 3. “There is a lot of good and quite competitive product from China flooding into the whole region…To SCG, this is the fact of life, and we have to adjust.”

Overcapacity occurs when factories can produce more than customers are buying. In petrochemicals—the building blocks of plastics and other industrial materials—China’s rapid expansion has squeezed producers elsewhere.

China’s exports of polypropylene, a widely used plastic, rose from 1.3 million tonnes in 2022 to 3.1 million tonnes in 2025, according to industry research firm ICIS. An ICIS analyst estimates exports could reach about 5.1 million tonnes in 2026 if the January-May pace continues.

Individual Southeast Asian markets are too small to absorb that shock alone, Thammasak argues. “The scale that produces only for Vietnam may not be enough,” he said. “You need to build the scale that produces for the whole ASEAN.”

“Over the past year, we are scrapping the old small factory and building a big one,” he said, citing a new ceramic plant in Vietnam “much bigger than the one in the past.”

On Oct. 28, SCG Chemicals filed to combine its Thai olefins and polyolefins business with that of PTT Global Chemical, Thailand’s largest petrochemical company, in a deal valuing the combined businesses at 187 billion Thai baht ($5.5 billion). SCG Chemicals would hold 44% of the venture, with shareholders due to vote Dec. 3. “The global olefins and polyolefins industry is experiencing increasingly intense competition, placing continued pressure on product spreads and operating rates,” Thammasak said in a statement at the time of the announcement.

In Ho Chi Minh City, Thammasak called the idea that automation is mainly a way to cut labor costs “a big misconception.”

“The bigger advantage is [that it’s] better in terms of quality, because the precision that the robot can do is far better than humans,” he said.

Thammasak’s fellow panelists were optimistic about Southeast Asia’s ability to climb up the value chain. “I visited a customer in Vietnam just yesterday. They used to make these industrial connectors—old-school industrial goods,” said Salil Chari, FedEx’s regional president for Asia-Pacific. “Now, with the growth in the AI data center space, they’ve moved up the value chain to creating fiber-optic cables for all these data centers.”