JEDDAH — The global polymer industry is expected to grow with a CAGR of 3.9% over 2015-2020. The demand for polymer is driven by growth in end use markets, such as packaging, automotive, infrastructure, transport rails, and telecommunication mainly from emerging economies. Polymer is continuously substituting metals, glass, paper, and other traditional materials in various applications due to its lightweight and strength and the design flexibility they offer brand owners along with low-cost. According to “Global Polymer Industry Report 2015-2020: Trends, Profits and Forecast Analysis”, thermoplastics segment is expected to witness the highest growth over the next five years. Increasing applications of engineered plastics in various fields, such as construction, automotive, and industrial manufacturing equipment to mechanical engineering is expected to drive this market. The GCC plastic industry must follow market and demographic trends to overcome price fluctuations, noted some speakers at the 6th annual GPCA Plasticon conference in Dubai recently. Plastic manufacturers, they said, must develop strategies that can overcome global feedstock challenges and meet demand from high population growth regions in order to continue to grow and prosper. “We are not here to forecast the prices of oil because we can't even predict what the price will be next week,” said Ziad S Al-Labban, Sadara chief executive officer, commenting on recent developments in the region's energy sector, which has seen a 50% decline in oil price over the last six months. “What we can do is to chart trends in the polymer industry to figure out where the market is headed.” In Asia and India, high demand for petrochemicals has far outstripped the level of supply. “This region has added 150mn tons of capacity since 1990 but supply is not fulfilling demand. So this region has the potential to be a major market for GCC polymers.” Historically, the middle class has been a major consumer of polymers, and with global population set to include over 60% of people within this demographic by 2030, demand for commodity plastics will grow, Al-Labban said. However, as nations develop, the production side of the petrochemicals industry evolves towards manufacturing more specialty chemicals. “Today, the GCC's products portfolio consists of only 0.2% of specialty chemicals and this will need to change,” said Al-Labban. He highlighted that the region must leverage its core strength of being strategically located in close proximity to areas that will experience population growth spurts. “Forty percent of the world's population is within 3,000km from our manufacturing units.” Moving forward, companies in the GCC must also use technology to withstand market uncertainties. “At Sadara, we have the world's largest mixed feed cracker. Two of the 12 furnaces in our facilities can swing from gas to liquid feedstock depending upon the market conditions,” explained Al-Labban. “I recommend creating value by using technology to go into specialty products because the future in commodities is limited.” These sentiments were echoed by Abdullah bin Saleh Al-Suwailem, chief executive officer, Petro Rabigh. “The GCC petrochemical industry is a gas based industry with limited liquid feedstock capabilities,” said Al-Suwailem. “Refocusing our commodities base towards a more specialty chemicals portfolio will open up growth and investment opportunities. These value creating products are also aligned with the national strategies of GCC governments as they offer significant opportunities for job creation.” While challenges associated with the oil price decline may have an effect in the coming months, there are also other market fluctuations that have affected the region's petrochemical producers recently. “Legacy thinking of the GCC's competitive advantage includes the lowest polymer price globally, low utility and labor costs, strategic location among others,” said Mosaed Al-Ohali, executive vice-president (Polymers) Sabic. “However, this is changing. If you look at polymer trade with the EU between 2013 and 2014, there is a $ 200 a ton loss in competitiveness due to a rising import tariffs, increasing labor costs and a growth in inflation.” Despite these obstacles, there are also opportunities. “We are living in an inverted world — and the world continues to change. Today, the share of GDP growth shows that emerging economies outpace their advanced counterparts,” Al-Ohali noted. “This could lead to big opportunities for our business.” In 2014, the GCC's polymer capacity reached 25.5 million tons, a 6% increase from the previous year, according to the GPCA. Saudi Arabia leads the region's plastics production market, manufacturing an estimated 18.3 million tons, or 72% of the region's polymer production capacity. The UAE follows the Kingdom, holding the region's second largest plastic production capacity, or 13% of the region's polymer capacity. Additionally, the GPCA predicts that industry will manufacture an estimated 33.3 million tons of polymer products by 2020, a 25% growth from present capacity. “Plastics improve the lives of millions of people everyday,” said Dr Abdulwahab Al-Sadoun, secretary-general, GPCA. “From lightweight automotive parts that reduce the overall fuel consumption of cars, to safe packing for food products, plastics make up the building blocks of several industry. While there is a necessity to fulfill present demand, what the region's plastic manufacturers also need to plan is the products that will change the lives of billions in the next 10, 20 or even 30 years.” — SG/Agencies
