• The Gulf petrochemical sector expects a recovery in the third quarter with improved demand prospects


    Abdulaziz Al-Faki from Dammam​

    Dr. Abdul Wahab Al-Saadoun, Secretary-General of the Gulf Petrochemicals and Chemicals Association (GEPCA), expected that the third quarter of this year will witness the beginning of a recovery in the petrochemical sector, but the demand and growth rates will be relatively modest compared to their previous levels.​

    Al-Saadoun told Al-Iqtisadiya, "It is difficult to estimate and determine the impact on the sector as a result of the Corona pandemic, but it is certain that all sectors of commodity products have been negatively affected, just as the pandemic affected the global economic scene and the oil market in particular," noting that the petrochemical industry It is an extension of the oil market as a result of the direct link between them.

    He pointed out that some companies have already announced cuts in their investment plans and postponed a number of expansion projects inside and outside the region. For example, not limited to, major companies in the sector suspended their capital expenditures for 2020, with the exception of the capital expenditures for safe and reliable operations, and their projects that are nearing completion.

    He added, "Globally, the effects of the negative pandemic extended to the share prices of petrochemical companies, as the companies producing basic petrochemicals were more affected than others, as they witnessed a decrease in their share prices by 33.1 percent compared to the prices of the previous year. In contrast, the impact on specialized chemical producers was less severe. It saw a 23.7 percent decrease in share prices during the same period.

    He pointed out that the chemical industry in the countries of the Gulf Cooperation Council has a strong multiplier effect in the regional gross domestic product, for example, the Kingdom is one of the ten largest exporters of chemicals in the world, and it has an environment conducive to foreign direct investment as well as the establishment of new partnerships and the development of joint ventures, with Taking into consideration the advantage of accessing the main markets and the proximity of the availability of raw materials at a competitive cost, in addition to the rapid development in Saudi Arabia​.

    He mentioned that Saudi Arabia has worked to improve and facilitate the practice and establishment of businesses, reduce bureaucratic obstacles, and improve the efficiency of its supply chains, indicating that the Saudi chemical industry tops the regional regulations in terms of production and diversification in the product portfolio.
    He pointed out that, as a sign of the industry’s exposure to changes in the global economy, Gulf companies have taken proactive steps focused on improving performance and raising the efficiency of operations, which was reflected in their maintenance of operating rates exceeding 100 percent of the design capacities of most of the production complexes, while the rate of global industry operation decreased From 85 to 76 percent during the Corona crisis.

    He emphasized that the petrochemical industry in its various fields played an important role in addressing the Corona pandemic and its contribution to saving human lives, as the demand for packaging, sterilization products and basic petrochemicals involved in the production of sterilization materials, respirators, and materials used in the manufacture of masks increased.
    He added, "This matter is not the stereotype of the sector's products, even though it is not based on scientific constants towards plastic." Noting that those interested in the sector are witnessing a kind of change in the perspective that some environmental activists were presenting in their media campaigns against this material, as they started to Reassessing this prevailing perspective, especially when looking at the important role that plastics and petrochemicals play in general in protecting the medical system and the first line of defense in dealing with the epidemic.​
    He pointed out that the petrochemical industry in the Gulf states is part of the global industry, as it exports its production to foreign markets, which makes it vulnerable to international changes.
    He emphasized that the Gulf industry sought to enhance its global competitiveness by increasing the frequency of mergers and reconsidering growth strategies and diversifying the product base. These steps include the merger of Sipchem and Sahara Petrochemical companies, Aramco's acquisition of SABIC, and the important process of mergers and integration undertaken by the most important The companies of the oil, gas and petrochemical sectors in Oman are under the umbrella of OQ, which has formed a kind of immunity or flexibility that contributed to enhancing the sector's ability to deal with the emerging Corona crisis.
    He explained that the Gulf producers still have their competitive advantage in terms of production cost, noting that the decline in petrochemical prices in the global markets means a significant decline in revenues and profit margins, which will necessitate a major review of expansion projects inside and outside the region, and may lead to a slowdown in spending Corporate capitalist aggravate the situation more in the short term​.

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