GPCA ’16: Global petchems demand to continue outpacing GDP growth

SINGAPORE (ICIS)–Global demand for petrochemicals is projected to grow at 4.0-4.5% on an annual basis – double the pace of world economic growth – in spite of the slowdown in a number of key developing markets, the secretary general of the Gulf Petrochemicals and Chemicals Association (GPCA) said on Friday.

“Even though there is a slowdown in China and there are economic challenges in the Latin American economies which will affect petrochemical demand, growth will remain at double the global GDP average,” Abdulwahab Al-Sadoun told ICIS.

Global economic growth this year is projected at 2.4% by the World Bank, and at 3.1% by the International Monetary Fund (IMF), with a mild improvement expected for 2017.

For the 2015-2021 period, oil demand for petrochemicals is forecast to increase by roughly 2m bbl/day, representing an annual growth of almost 3%, according to the 2016 Medium-Term Oil Market Report of the International Energy Agency (IEA).

GPCA will hold its annual forum in Dubai, the UAE, on 27-29 November with the theme “Competiveness, Riding New Waves”. The event, which has attracted around 2,000 delegates, will focus on what petrochemical companies need to focus on to remain globally competitive, according to Al-Sadoun.

The 11th GPCA Annual Forum will be inaugurated by SABIC vice chairman and CEO Yousef Al-Benyan, who assumed the role of the association’s chairman in May this year.

Investment opportunities will always be present for niche petrochemical segments despite the low crude environment, the GPCA executive said.

“Our industry is cyclical and when the cycle goes down to the bottom it is an opportunity for chemical investments to flow into capital intensive projects such as petrochemicals,” Al-Sadoun said.

Some industry players can take advantage of the current low construction costs in the GCC, with steel prices now much lower than they were before, he said.

“From that perspective demand [for petrochemicals] is the critical factor, as well as the availability of feedstock, especially in our region.”

GCC’s petrochemical industry mainly caters to the export market, with 80% of products being shipped out. As such, the regional industry is facing some serious challenges, including port congestion, complicated customs procedures, under-invested infrastructure and stalled free trade agreement negotiations with the major economic blocks like the EU, Al-Sadoun had said in May this year.

During the interview, the GPCA executive said that open market policies are critical for the development of the petrochemicals industry in the region, noting that while the upcoming US presidency will create uncertainty in the market, the flow of chemicals globally will not be drastically affected.

“We [GPCA] advocate open market policies. We believe that it is beneficial for all, whether it is at the receiving end, as well as the exporting end, because the removal of trade barriers will lead to lower prices for end-users,” Al-Sadoun said.

“It really makes sense to remove all trade barriers, whether they are commercial or technical, it’s beneficial for everyone. This will prevail in the long run as the benefits are tangible,” he said.

Interview article by Nurluqman Suratman