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Israel Petrochemicals Report Q3 2010
Business Monitor International, May 2010, Pages: 53
Israel Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Israel's petrochemicals industry.
Despite the risk of a return to recession in global markets and its impact on Israeli chemicals and plastics production, this latest ‘Israel Petrochemicals Report’ is broadly positive and anticipates growth in the years ahead, assisted by a gradual recovery in private consumption and capital investment Private consumption, which accounted for around 57% of nominal GDP last year, will remain the principal driver of real growth over the coming years. Petrochemicals output growth in 2010 will be led by exports, which makes it vulnerable to external shocks, particularly if the weak expansion in developed states falters and causes a ‘double-dip’ recession. Of particular concern is Israel’s exposure to the US economy, which is set to see a moderation in growth rates after 2010. The other risk factor is the gradual withdrawal of monetary and fiscal stimuli across developed and emerging markets over the coming quarters, which would depress external demand for Israeli petrochemicals exports with an attendant impact on domestic output.
Regardless of these downside risk factors, the situation facing the Israeli petrochemicals industry is broadly positive. Over the course of our five-year forecast period, we project annual real GDP growth to average 2.9%. Interest rates are very low by historical standards and we expect investment to pick up over the coming quarters, although it will take until 2011 for it to return to 2008 levels. We also highlight the strong recovery in purchases of durable goods over the course of 2009, which should bolster domestic consumer goods industries that utilise plastics. As unemployment falls, private consumption should grow. Coupled with a revival in key export markets in Europe and North America and expansion in developed markets such as India, this should bolster growth in the Israeli petrochemicals sector. Notably, the manufacturing sector indicators continue to head in the right direction as well, with the production index showing signs of significant improvement from Q409, thereby generating endogenous demand for petrochemicals and chemicals products.
In 2009, Israel’s petrochemicals industry included capacities of 450,000tpa ethylene, 345,000tpa propylene, 125,000tpa benzene, 230,000tpa xylenes, 165,000tpa PE, 450,000tpa PP, 160,000tpa PVC and 60,000tpa of methanol. The authors do not envisage any substantial increase in capacities over the next five years, with no plans for new petrochemicals plants over the medium term. The authors forecast that ethylene production will rise from 200,000tpa in 2006 to reach 450,000tpa by 2014, due to expansion programme of Carmel Olefins (COL). PP capacity should remain at 450,000tpa beyond the forecast period on current indications, while PE capacity is not forecast to change from current levels of 165,000tpa. However, the authors expect new investment plans following the privatisation of ORL, with a likely expansion over the forecast period.
In the Middle Eastern Petrochemicals Business Environment Rankings matrix, Israel lies in sixth place with a score of 55.2 points, up 0.4 points since the previous quarter due to an improvement in country risk. It has fallen one place since the previous quarter due to a surge in Kuwait’s position in the rankings, linked to the Gulf state’s growth in petrochemicals capacities. With no planned significant growth in petrochemicals capacities over the medium-term, Israel’s score is unlikely to change much over the next five years, although it could be improved by better political, economic and business risk ratings. Compared with competitors’ scores, Israel is 2.1 points behind Iran – the region’s second largest petrochemicals producer after Saudi Arabia – and 1.9 points ahead of South Africa.
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