Mideast chems could see good returns in downturn

04 December 2008 12:04  [Source: ICIS news]

SINGAPORE (ICIS news)--Middle East chemical players are expected to put their capital to good use during the extended trough in the investment cycle, when oil prices hover above $50-$60/bbl, a McKinsey & Co consultant said on Thursday.

The global chemical industry’s return on invested capital during the current downturn could potentially be more compared with returns invested during past downturns, according to a presentation by McKinsey’s Florian Budde at the 3rd Gulf Petrochemical and Chemicals Association (GPCA) forum.

Gas would be a major source of growth for regional players given its compounded annual growth rate of 21.1% through 2012, Budde said.

But naphtha is expected to grow in importance as a feedstock in the long term to 2020, the consultant said.

Budde said McKinsey has identified 44 out of 106 chemical products or processes as viable for new investment, including ethyl vinyl alcohol, high density polyethylene (HDPE) and low density PE, and ethylene oxide.

Among the non-viable investments mentioned were acetone, ethanol amines, acrylic acid and polyvinyl chloride, he said.

In the short term, the strategies that Middle East chemical players could use to cope with technology challenges would be to form joint ventures with international players, pursue acquisitions of established players and offer technology licensing, Budde said.

In the long term, the region’s players must strive to develop new technologies through their own research and development programmes, Budde said.

To discuss issues facing the chemical industry go to ICIS connect

By: Leon Toh
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly