By John Richardson
Confidence among Middle Eastern petrochemical producers remains high because they obviously now that as long as oil prices do not collapse they will continue to make excellent money, said a chemicals analyst.
The blog believes that there is a very strong chance that crude will collapse to as little as $25 a barrel as we enter a new global recession. This would result in even the likes of SABIC being forced to think again as petrochemical pricing in turn collapses.
The mood in the Middle East is not only being buoyed by good margins.
"Market share is being gained thanks to the ironing-out of production problems," the analyst added.
As we have reported before on the blog, frequent technical issues at new plants is one of the reasons why petrochemical supply was tight in 2009-2010. New supply was drip-fed into markets rather than arriving in a sudden flood as many observers had predicted, with demand during the recovery from the late 2008 crisis bolstered by government stimulus packages.
Many of the technical problems look as if they have been resolved, resulting in a substantial surge in exports from the Middle East, the analyst added
"Overall petrochemical exports from the port of Dammam in Saudi Arabia were substantially higher in August compared with July," he said.
"We have seen a steady improvement in output throughout 201l with no one notable exception - Saudi polypropylene (PP).
Technical problems at the 450,000 tonne/year Al-Waha Petrochemical plant forced a shutdown on 1 July with production resuming in August, according to our colleagues at ICIS news.
Operating rates at National Petrochemical Industrial (NATPET), a 400,000 tonne/year operator, were reduced in July in order to resolve problems at the plant.
And Petro Rabigh - the 700,000 tonne/year producer - underwent an extended turnaround in an effort to resolve issues at its deep catalytic cracker that ended in August, ICIS news was also told.
PP output is up at all three plants as demand in China takes a battering from a sharp slowdown in auto sales.
An overall increase in Middle East petrochemical output is occurring as governments pull back on economic stimulus - most importantly in China.
Polyethylene (PE) trade data from China for H1 of this year show the big gains made by the Middle East as overall demand fell by 2.5 per cent.
The rest of this year does not look good for the higher cost producers in Japan, South Korea and elsewhere as there are no indications of China easing back on its battle against inflation,
And for everybody, including even the Middle East, it is hard to find reasons to be optimistic about 2012.