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Israel Petrochemicals Report Q1 2011
Business Monitor International, Nov 2010, Pages: 45
The 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.
Appreciation and rising domestic interest rates are set to lead to a slowdown in the Israeli petrochemicals industry in 2011, according to BMI’s latest Israel Petrochemicals Report.
Competitiveness in the Israeli petrochemicals industry could be undermined by a possible appreciation of the Israeli shekel over the months ahead. The sheckel is testing multi-year resistance at the ILS3.6500/US$ level, with a possible break paving the way for additional upside for the currency. Indeed, favourable financial market sentiment - with the US carry trade in full swing - suggests that the shekel rally may have further to run. Our bullish outlook on the shekel is reinforced by monetary tightening by the Bank of Israel (BoI), which raised its policy rate for the sixth time since August 2009 to 2.00%. A drop off in exports to the eurozone would have a significant impact on export figures, given that around 30% of Israel's exports are typically directed to the eurozone. Israeli exporters could, in theory, make up for a drop off in European demand by shifting their goods to other states. However, we are sceptical about this possibility. A rise in interest rates at a time when Israel’s economic recovery is slacking could also hamper hopes of a rebound in the Israeli petrochemicals market.
In 2010, 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. BMI does not envisage any substantial increase in capacities over the next five years, with no plans for new petrochemicals plants over the medium term. However, BMI expects new investment plans following the privatisation of the main player in the sector, Oil Refineries Ltd (ORL), and its likely expansion over the forecast period.
In the long term, the privatisation of ORL is likely to result in moderate capacity expansion and the possibility of some domestic gas-based production. The new owners are also likely to integrate the two privatised entities that were created from ORL, centred on the Ashdod and Haifa refineries respectively, with their other interests in the petrochemicals sector.
The Israeli petrochemicals sector is likely to remain focused on domestic sales and is not expected to rival other markets in the region. This is primarily due to the country’s lack of upstream activity. While Gulf States have developed petrochemicals industries on the back of their domestic gas and oil production, Israel’s gas and oil production is negligible. If recent offshore gas discoveries are confirmed, there may later be some scope to develop the petrochemical industry further.
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