Mideast petchem makers eye bigger chunk of Africa market

Muhamad Fadhil

28-Jul-2015

Japan July chemical exports fall 8%; plastics shipments down 10%JOHANNESBURG (ICIS)–Middle East polymer producers are keen to beef up exports to Africa given softening demand in the key markets of Europe and Asia, industry sources said on Tuesday.

The strong build-up in the Middle Eastern petrochemical capacity in recent years necessitates exploration of new markets that could absorb the region’s produce.

The region’s polymer capacity is expected to grow 16.5% over two years to 29.6m tonnes in 2016, according to ICIS data.

The African continent is a “new frontier” for most Middle East polymer players, a Dubai-based trader said.

By 2020, polymer exports to Africa from the Middle East are projected to increase by 800,000 tonnes from 2m tonnes/year in 2014, according to information from the ICIS Supply and Demand database.

“Africa cannot absorb everything. But, Middle East producers are pushing hard to sell more to convertors there due to a combination of weak demand and ample supply,” a second trader based in Dubai said.

Gulf producers active in Africa include Saudi Arabian petrochemical giant SABIC and Qatari state marketer Muntajat.

Middle East suppliers are looking to push more volumes into Africa on account of a sharp slowdown in demand from their major export market – China.

China, which is the world’s second-biggest economy, has been slowing down since 2010 and is projected to post a 2015 growth of 7.0% – the weakest in 25 years.

Opportunities to export to China are further dampened by the country’s build-up of petrochemical capacity to reduce its reliance on imports, market sources said.

Coal-to-olefins (CTO) and methanol-to-olefins (MTO) facilities accounted for 18.4% or 5.96m tonnes/year of China’s polymer production, according to ICIS data.

“China is proving to be a tough market to break into this year for a number of Gulf producers. Weak demand is worsened by relentless competition,” a major Asian-based polymer distributor said.

Meanwhile, competition for a share in the European market will intensify among Middle Eastern producers with the expected re-entry of Iran, when the international sanctions on the country are lifted, industry sources said.

On 14 July, Iran and six world powers struck a comprehensive deal to ease the crippling financial sanctions imposed on the country in exchange for long-term curbs on its nuclear program.

“Iran will sell more to Europe, creating a further vacuum for Middle East suppliers. So, for these producers, Africa will be a natural choice to sell to,” said a Dubai-based distributor selling polymers to west Africa.

Prior to the sanctions imposed on suspicion that it was developing a nuclear weapon, Iran was a major exporter of polyethylene (PE) to Europe.

Given the Middle East’s thrust to boost petrochemical capacity, the region needs a new export market.

“Africa will be a major destination of new polymers produced in the Middle East,” a Middle East petrochemical distributor said.

In the UAE, Borouge is set to ramp up production at its expanded Ruwais complex. The third phase of expansion in Ruwais, also known as Borouge 3, will increase the company’s total chemical capacity to around 4.5m tonnes/year by end-2015 from 2m tonnes/year currently.

Borouge 3 comprises a 1.5m tonne/year ethane cracker and derivative plants, including high density PE (HDPE) and linear low density PE (LLDPE) units with a combined capacity of 1.08m tonnes/year; a 350,000 tonne/year low density PE (LDPE) unit; and two polypropylene (PP) units with a combined capacity of 960,000 tonnes/year.

Africa’s own polymer capacity is also set to grow in the coming years.

“Middle East producers will also need to face stiffer competition from African producers at some point,” the Middle East petrochemical distributor said.

In Egypt, a 400,000 tonne/year LLDPE/HDPE project and a 320,000 tonne/year PP plant is expected to begin production sometime in 2017 or 2018, according to ICIS data.

The LLDPE/HDPE plant is owned by the Egyptian Ethylene and Derivatives Company (ETHYDCO), while the PP plant will be operated by Oriental Petrochemicals (OPC).

Among other African producers are Sasol and Safripol of South Africa; and Eleme of Nigeria.

Africa Map

Focus article by Muhamad Fadhil

Additional reporting by Matt Tudball

Muhamad Fadhil and Matt Tudball will be presenting at the 2nd ICIS African Polymers Conference, taking place on 28-29 July in Johannesburg

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?