GPCA '11: Petchem firms must innovate to be competitive – analyst

15 December 2011 08:10  [Source: ICIS news]

DUBAI (ICIS)--Petrochemical market players must innovate more aggressively to stay competitive as the industry matures because specialised products command higher price premiums and margins, an industry analyst said on Thursday.

Using the US as an example, demand for speciality chemicals and basic chemicals has been growing at a slower pace as compared with GDP, and this is expected to continue, said Hassan Ahmed, partner and head of research at Alembic Global Advisors.

“Demand [for chemicals in the US] is struggling to keep pace with GDP growth,” he said, speaking at the 6th GPCA Forum in Dubai.

“It not just the commodities, the specialties [chemicals] are feeling the pressure of smaller growth,” Ahmed said.

Looking ahead, the global chemicals industry is expected to move further into the “third wave” of product innovation, with firms increasingly looking into new fields such as biotechnology and green technology, instead of concentrating on commodities and polymers such as polyethylene (PE), he said.

Chemical firms should consider consolidation as an option to remain competitive, as the industry is increasingly being squeezed between big oil players on one side and highly consolidated end-markets on the other, according to Ahmed.

Companies that spend more on R&D will also be able to command higher premiums and generate higher product prices, he said.

Tightly integrated upstream and downstream operations such as those adopted by ExxonMobil will give “far superior returns” and generate better shareholder returns, Ahmed added.

The 6th GPCA Forum is being held in Dubai on 13-15 December, with the theme “Moving Downstream – Creating Value and Sustainable Growth”.

By: Nurluqman Suratman

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