GPCA ’16: Consolidation could be key for GCC’s competitiveness

DUBAI (ICIS)–Consolidation could be a key strategy for GCC petrochemical companies in order to remain competitive in the global marketplace, the chairman of the Gulf Petrochemicals and Chemicals Association (GPCA) said on Monday.

“I believe that that the only way for our industry to survive and thrive in the global marketplace is by creating synergies and optimising our current assets,” Yousef Abdullah Al-Benyan told delegates at the 11th Annual GPCA Forum in Dubai.

Al-Benyan noted that many GCC producers still lack the global network as well as the capital to meet the scale required to be truly competitive, and this might require them to involve mergers and acquisitions as part of their strategy, he said.

The industry will also need to understand the fast-changing competitive landscape that it is facing, he said.

While the GCC chemicals industry has seen spectacular growth over the last two decades, with ethylene capacity growing from 5m tonnes/year in 2000 to over 20m tonnes/year in 2015, much more needs to be done to boost its market share globally, he said.

Al-Benyan noted that the entire Middle East and Africa region now has less than 2% of yearly global chemical sales at €44bn.

This compares to around €530bn in the NAFTA (North American Free Trade Agreement) region and the EU’s €551bn in chemical sales, he said.

“We are very exposed and this is a fact that we need to remember,” Al-Benyan said.

“The competitive landscape is shifting beneath our feet… the fundamentals are changing not only for the GCC but customers as well,” he said, adding that feedstock availability is no longer a key advantage for the Middle East.

The US, for example, now has the advantage in terms of natural gas and has “brought itself away from stagnation and becoming a new leader”, he said.

Al-Benyan said that the GCC chemicals industry will first need to improve and boost efficiency of its existing assets in order to remain competitive.

“Many of our complexes are standalone with limited or zero integration,” he said.

“This limits our ability to optimise production when product prices move,” Al-Benyan said.

This compares to crackers in other regions that are connected within ethylene grids that can adapt quickly to market challenges and price movements, he noted.

The GCC is limited in this aspect and “should do more to overcome this”, adding that the industry must also build local market capabilities as well as extend its product ranges to keep it in a better position in the future, Al-Benyan added.