14 December 2011 15:08 [Source: ICIS news]
DUBAI (ICIS)--The global petrochemical industry may see more temporary or even permanent plant shutdowns in the near term as a result of the ongoing eurozone debt crisis and economic issues in the US, Saudi Arabia’s National Petrochemical Industrial (NATPET) chief operating officer and president Jamal Malaikah said on Wednesday.
“The current uncertainties in these two important regions would mean lower GDP growth and this in turn will reduce demand on commodities,” said Malaikah.
“This will definitely mean that the current petrochemical players will have to compete for shrinking markets, causing downward pressure on prices,” he said.
Malaikah was speaking on the sidelines of the 6th GPCA (Gulf Petrochemicals & Chemicals Association) forum in Dubai.
A drop in product prices will result in lower margins for Gulf Cooperation Council (GCC) producers, but these firms are better positioned, partly because of the feedstock advantage they have over others, Malaikah said.
“But ultimately GCC producers are not immune to losses if the recession is big,” he said.
It is still unclear how overall demand for petrochemicals will be affected by the eurozone crisis as it depends on which country or countries “go under”, said Malaikah.
“It also depends on the recent remedies by Italy and whether they will work or otherwise. Italy is a key European market,” he said.
The situation in the US is still unclear and the petrochemical industry will need to monitor developments there closely, Malaikah said.
The US has severe debt issues and its government does not have the ability to undertake drastic stimulus plans to help boost the economy, he added.
“The world may witness something that we haven’t seen in our lifetime, so I cannot really tell you how we will cope with such [a] situation, but in such scenarios you need to cut costs, maintain production efficiency and be more effective. The situation, however, is very fluid,” said Malaikah.
“Today we are witnessing the inevitable effect of high spending and debt of the governments and maybe individuals in many European countries. The west must revaluate the way their governments are spending. This is not an option,” he added.
Looking ahead, the rapidly growing consumption of utilities and gasoline in Saudi Arabia is expected to put pressure on availability of gas feedstock, according to Malaikah.
“We are hopeful that the concessions given by the government to explore non-associated gas will bring fruitful results. However, we highly encourage the government to look into utilising liquid feed for use in the petrochemical industry in a fashion similar to gas feedstocks,” he said.
“It is definitely more economically rewarding if you build petrochemicals based on liquid feed than exporting it as fuel. Future generations’ welfare depends on such ambitious schemes,” Malaikah added.
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