In recent months, the industry has been focusing much of its attention on unconventionals as the shale revolution has, to some extent, turned the sector on its head. Yet, the petrochemicals industry is not one to be ignored, especially as it is itself being impacted by the shale phenomenon as well as a number of other key factors across the globe.
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Petrochemicals in the Middle East are on the whole looking strong as they are dominated by large scale complex production facilities that are in many instances putting the rest of the world to shame. One example of the overwhelming strength of the Middle Eastern industry is Qatar and the plans that QAPCO have in the pipeline from the development of a large petrochemicals complex at Ras Laffan to the Al-Sejeel Petrochemicals Complex which is due to come online in 2018 and is a joint venture with Qatar Petroleum. The country is also benefitting from the European recession and the decline in manufacturing growth throughout Asia. Yet, there is one area of the Middle East that is struggling when it comes to petrochemicals and that is Iran. The sanctions that are still in place along with slowing growth in China, which is currently the country’s main export market, do not bode well for the domestic petrochemicals industry at all.
Moving to Asia and the outlook for the petrochemical industry seems to be one of quiet optimism. The region is being seen as a threat to the European petrochemicals industry in particular due to the significant advantage of cheap labour costs: In Europe, labour can amount to nearly 14% of the cost of chemical production. However, it’s not only human resources that are boosting the continent. The petrochemicals sector in Vietnam in particular is looking to get an enhancement from 2018 as the Nghi Son and Long Son Island complexes are due to come online that year. These new projects are set to transform the country from a net importer of petrochemicals to a completely self sufficient petrochemicals producer, be they only basic chemicals, and there is the scope for future development once the above projects are complete. Japan also seems to be quietly confident as the key end markets for petrochemicals are thought to be on the up from automotive to construction which require vast quantities of petrochemical products such as PVC.
Unfortunately, when it comes to Europe, the petrochemicals sector is not looking too great. In the region as a whole (and especially the EU), it is thought that the industry is relatively underdeveloped, and with the competition from the US ever increasing due to cheap petrochemicals feedstocks, things are not expected to improve all that quickly. Permanent plant closures have been a threat to the continent for a while with one of the most notable being the impending closure of the Grangemouth INEOS plant, UK towards the end of last year which was narrowly avoided. The stagnant export market is also proving to be a problem for the region especially in tandem with the continuing economic downturn in Europe.
The petrochemicals industry across the world certainly is a mixed bag at the moment and for me, at least, is a sector that I’ll be monitoring with interest as the year progresses.