Gulf petrochemical companies could almost double their market share to reach 20 per cent of global production over the next decade as a slump in consumption winds down, the chief executive of the world's biggest chemical maker says. Saudi Basic Industries Corp (SABIC) will triple its production to reach 130 million tonnes by 2020 as the recession strengthens the Gulf's role, the chief executive Mohammed al Mady said in Dubai yesterday.
"Our region has strengthened its position as the centre of gravity for global petrochemical production," said Mr al Mady. "The recession has resulted in plant closures in other parts of the world, while our region has continued to witness plant start-ups, as well as additional investments in new projects." The Gulf accounts for about 11 per cent of the global petrochemicals market and is gaining from a shift in production from higher cost locations in Europe and the US.
While SABIC and other regional companies have capitalised from that, Mr al Mady acknowledged that some of his firm's production facilities could face shutdowns amid fast-changing global supply and demand. Its US unit, bought from General Electric in 2007, also plans to cut about 1,000 jobs by the end of the year. "There will be some shutdowns and some of them will be done by us," Mr al Mady said. But he added further job cuts or capacity reductions were unlikely at its US business because of signs of improvement in the American economy.
Sabic is developing much of its new capacity in China, where it is about to start production at a US$3 billion (Dh11.01bn) complex in Tianjin through a joint venture with China Petroleum and Chemical, also known as Sinopec. Rival producers are also focusing on the world's third-largest economy to tap into rising demand for plastics, created by a population of 1.3 billion people and economic growth that could reach 9.1 per cent next year, according to a forecast by the Chinese Academy of Social Sciences that was published yesterday.
The shift comes as older production plants in Europe and North America struggle to compete because of their higher feedstock costs and distance from emerging markets in Asia. "In the US and Europe, the big projects are not there," said Hamad al Terkait, the chief executive of the Kuwait petrochemicals company EQUATE. "In the coming five to 10 years you won't see massive projects as you used to. To build a cracker in Europe is not going to be as competitive as it was 20 years ago."
As Gulf petrochemical producers seek to boost their share of the global market, the industry is becoming increasingly critical of what it describes as protectionist measures being adopted by the governments of China, India and the EU against exports from the region. "The GCC industry and our governments will not accept the application of anti-dumping regulations against exports of petrochemicals and chemicals from the Gulf," said Abdulwahab al Sadoun, the secretary general of the Gulf Petrochemicals and Chemicals Association (GPCA).
"We have seen a surge in protectionist actions brought by countries to block imports," Mr al Sadoun said. "These cases are baseless and violate international rules." The GPCA yesterday reiterated calls for other countries to respect World Trade Organisation rules. @Email:scronin@thenational.ae
