APIC ’12: Petchem industry in for further consolidation - Nexant

17 May 2012 11:45  [Source: ICIS news]

KUALA LUMPUR (ICIS)--The petrochemical industry is shaping up to become more consolidated in the future, with a smaller number of global players becoming stronger and more focused, like Germany’s BASF and US-based Dow, a consultant said on Thursday.

Andrew Spiers, senior vice president at consulting firm Nexant Asia, added that there will be fewer fully-integrated players, such as US producer ExxonMobil, while there will be more niche, specialty players in the market, similar to Huntsman in the US and Belgium-based Solvay.

“Further industry consolidation is expected,” Spiers said at the 34th annual Asia Petrochemicals Industry Conference (APIC) being held in Kuala Lumpur on 17-18 May.

He also said that there will be more significant merger and acquisition opportunities.

The industry has experienced a huge change over the last 20 years as Asia and Middle Eastern producers increasingly dominate, with significant crude oil volatility, massive new capacity additions and the emergence of financial investors, Spiers said.

For example, the Middle East will account for 42% of global monoethylene glycol (MEG) capacity in 2020, supported by the availability of low-cost ethane. In 2010, the Middle East held 31% of the global MEG capacity, almost double the 17% share it had in 2000.

China too is increasing its own share. It is expected to account for 17% of global MEG capacity in 2020, from 6% in 2000, according to Nexant.

With China expected to remain a significant importer of ethylene derivatives, there is growing inter-dependence between the Middle East and Asia that will bring further implications for global growth, Spiers said.

However, he added that the industry will continue to be cyclical, and because of this, “the industry supply structure continues to evolve as a consequence of changing feedstock dynamics”.

In the future, Spiers said there will be more emphasis on refinery integration and renewed interest in more remote/undeveloped areas, such as West Africa and some parts of southeast Asia.

In addition, heavier feedstock slates in the Middle East will result in higher production costs while US producers will enjoy an improving advantage thanks to the vastly changing attitude towards shale gas.

Spiers also said that coal-to-chemicals projects are “changing the landscape” of the chemical industry, especially in the value chains of coal to olefins, coal to MEG, and coal to urea.

By: Franco Capaldo
+44 (0)20 8652 3214

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