New capacity is being delivered to a market that is already oversupplied
Basic plastics producers in the Gulf face years of difficult market conditions as the region adds millions of tonnes of new production capacity in the face of an already oversupplied market, according to a senior executive at Abu Dhabi Polymers Company (Borouge).
The company already manufactures 600,000 tonnes a year (t/y) of the basic plastic polyethylene at its Ruwais production complex, and is in the process of starting up a second-phase expansion, Borouge 2, which will allow it to produce a total of 2 million t/y of polyethylene and another basic plastic polypropylene.
Meanwhile, it has just awarded construction contracts for a third-phase expansion, Borouge 3, which will allow it to produce a total of 4.5 million t/y of plastics at Ruwais by 2014. This kind of rapid capacity expansion is in evidence across the region, he said.
According to Roy Vardheim, chief operating officer at Borouge, Gulf petrochemicals producers will add 15 million tonnes of new basic plastics output capacity between 2009 and 2012. Global petrochemicals demand was 115 million t/y compared with production capacity of around 132 million t/y in 2009, MEED research shows.
“It is kind of an extreme situation,” Vardheim said at MEED’s Middle East Petrochemicals 2010 conference in Abu Dhabi on 8 June. “We are running Borouge 1, starting Borouge 2, and building Borouge 3. And this isn’t just happening in the UAE, but all over the GCC.”
As a result, the region’s producers will face stiff competition in finding customers to buy their products.
“It is going to be a tough market for manufacturers,” Vardheim said. “I made a speech a year ago where I called it a bloodbath. That was maybe a bit much, but it is going to be a tough market.”
Borouge believes it will maintain a competitive advantage over its rivals because of the high quality of its plastics, which are tailored to the industrial, automotive and advanced packaging markets, he said.
More from MEED Middle East Petrochemicals 2010:
You might also like...
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.