SINGAPORE (ICIS)--The Gulf Cooperation Council's (GCC) chemical industry is projected to post a 15-20% revenue growth in 2021, reversing the contraction of more 20% last year, on the back of higher output and trade despite no dramatic recovery in upstream crude oil prices.
The projected growth, however, is still lower than the pre-pandemic pace of expansion of 25-30%, when incremental annual revenues were posted at $80bn since 2011, the Gulf Petrochemicals & Chemicals Association (GPCA) said on Tuesday.
Higher oil prices and a demand rebound in end-user industries would drive up revenues this year, it said.
"When looking at 2021, consensus among agencies is that the oil price is not expected to see a dramatic recovery and is predicted to be at the $40-50[per barrel] range in the coming two years," said Nuriya Ismagilova, research and studies specialist at the GPCA.
"Commodity chemicals saw the sharpest revenue decline in 2020 and are expected to see a strong recovery next year . However, we don’t expect revenue to return to pre-pandemic levels," Ismagilova said.
"A critical aspect of dealing with revenue generation in 2021 will be to understand which end-user customer industries trends are temporary and which are permanent, as recovery will likely be uneven across end-markets and geographies," she said.
Chemical trades in the GCC by volume is projected to grow by up to 10% this year, reversing the decline of up to 20% in 2020, in line with the rebound in overall global trade.
According to the World Trade Organization (WTO), global merchandise trade is expected to bounce back and post a 7.2% growth in 2021, reversing the 9.2% decline last year, although this would still be below the pre-crisis trend.
The current forecast appears to be closer to the “weak recovery” scenario for the GCC than to a “quick return to the pre-pandemic growth trend”, Ismagilova said.
GCC’s chemical production for the year is projected to post a minimal growth of about 1.2% given no major capacity coming on stream in 2021, and with the industry operating at a high-capacity utilization rate.
"Global markets are expected to recover at a healthy pace which is expected to strengthen as the infection rate declines and vaccinations are rolled out throughout the year," Ismagilova said.
For the wider Middle East and North Africa (MENA) region, chemical output is forecast to increase by 3.6%, according to the American Chemical Council (ACC).
Global chemical output for the year is expected to grow by 3.9%, recovering from 2020’s 2.6% contraction, which was the largest decline in the last 40 years, according to the ACC.
GCC ECONOMY WILL SEE GRADUAL
The GCC countries will see a modest economic recovery over 2021-2023, with real GDP growth this year projected at 2.5%, after shrinking by about 6% in 2020, according to GPCA estimates.
“Like many other countries worldwide, GCC states were hit hard due to the impact of the coronavirus pandemic as well as weakening oil demand and crude oil prices," Ismagilova said.
The recovery during 2021-2022 will be felt across both the hydrocarbon and non-hydrocarbon sectors.
"As the [chemical] industry moves into 2021, the economic, political, environmental, and social issues which directly impact its development and performance are expected to play an important role in shaping its future," Ismagilova added.
Focus article by Nurluqman Suratman
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