Population growth and the expansion of infrastructure are spurring demand for plastics, leading to a growing production base in the GCC, according to the head of the region’s petrochemicals and plastics trade body.
Demand for thermoplastics, such as polyethylene and polypropylene, will grow to 5.3m tonnes a year (t/y) by 2015, up 51 per cent from the current 3.5m t/y, says Dr. Abdulwahab al-Sadoun, general secretary of the Gulf Petrochemicals & Chemicals Association (GPCA).
“There is a significant growth when we talk about the conversion industry,” says Al-Sadoun. “There will be an additional 1.8m tonnes of plastic processing capacity, mainly in Saudi Arabia and the UAE. This is mirroring the growth in the upstream industry.”
Strong regional demand for downstream products could be complemented by export growth, which currently accounts for around 10 per cent of production.
“There is potential to grow in coming years,” according to Al-Sadoun.
Export growth will be driven by a trend amongst plastic converters in developed markets to relocate to the Gulf to be close to the source of their feedstock. Upstream producers of basic petrochemicals products in Europe and the US have lost ground to Gulf producers such as Saudi Basic Industries Corporation (Sabic) or Abu Dhabi’s Borouge, leading to a shift to production to the region.
“This has created a trend in the downstream plastic conversion industry, for European converters to explore opportunities to move to the Middle East and be located next to the raw material producers,” said Al-Sadoun.
An example of this is German company Bischof + Klein, who have built a plant in Saudi Arabia’s Al-Khobar.
For exports to grow to the prime markets of Europe and Asia, Gulf producers have to prevail in anti-dumping cases brought against them. After legal conflict with Chinese and Indian competitors and governments, the GPCA is now coordinating a response to a case brought forward by the European Union against regional PET producers.
Al-Sadoun is confident that this, like disputes in the past, will be resolved in favour of local producers. The amount of cases is likely to be reduced with the recovery of the world wide economy.
“Most of those cases are linked to the global recession, there is a correlation between the recession and number of anti-dumping cases. We understand that because governments want to protect their industries,” he says.
A key challenge for increasing downstream production is the shortage of qualified staff. Al-Sadoun acknowledges the problem, but points out that measures are already taken to improve training and research, such as an institute dedicated to the plastic industry in Saudi Arabia and the development of a relevant curriculum at Abu Dhabi’s Petroleum Institute.
The creation of dedicated industrial parks, such as a polymers park in Abu Dhabi, will also help the industry to grow. In a similar vein, Saudi Arabia’s authority for industrial cities recently announced the development of six industrial parks dedicated to plastic conversion.