Mideast petchem makers eye bigger chunk of Africa market
Muhamad Fadhil
28-Jul-2015
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.
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
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