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Algeria Petrochemicals Report Q2 2011
Business Monitor International, Feb 2011, Pages: 47
The Algeria Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Algeria's petrochemicals industry.
New plants in Algeria should help the country take advantage of expected 4-5% annual growth in European markets in 2010-2015, although the new world-scale facilities opening in 2014 will miss out on the growth generated by European inventory rebuilds expected in 2011-2012 and by that time European operating rates should be at or above 90%, according to the latest Algeria Petrochemicals Report.
Nevertheless, while consumer confidence is growing in Europe, it is not yet at pre-crisis levels and the analyst doubts levels of production will ever return to 2007 levels. This should provide an opening for Algerian petrochemicals production over the medium to long term. Strong demand is being driven by consumers because they are using all sorts of disposable goods that drive ethylene, propylene, PE and PP growth. Focused on commodity petrochemicals, Algerian facilities will benefit from this growth, although the industry’s value added will remain low without the initiation of further development of downstream industries and diversification.
By tapping into locally available gas resources, the country’s development of an ethane-fed petrochemicals chain will enable Entreprise Nationale de l’Industrie Petrochimique (ENIP) in its joint venture (JV) with Total Petrochemicals and Qatar Petroleum, to undercut European plants. With 1.1mn tpa of ethylene production capacity and integrated downstream plants and low labour costs, the US$3bn petrochemical complex being built at Arzew will be more economic and efficient to run than smaller and often isolated European facilities.
Over the short term, demand is being held back by uncertainty, continued credit restriction and sluggish industrial revival complicated by the wind down of stimulus programmes, volatile raw materials, excess capacities and trade protectionism. With the sovereign debt crisis threatening to dent the fragile economic recovery, rates of demand growth will be low. However, the completion of the Arzew complex, delayed to 2014, will coincide with the full return to pre-crisis levels of demand and at a time when global markets will have adjusted and industries in Europe restructured in response to the massive increase in petrochemicals capacities in Asia and the Middle East in 2009-2011. This should ensure that increases in Algerian petrochemicals production will be profitable. However, an uncertain business environment and delays to the Arzew ethylene cracker are undermining the industry’s progress.
In the Middle East and Africa Petrochemicals Business Environment Ratings, Algeria is in 10th place with an overall score of 39.3 points, 0.1 up on the previous quarter owing to an improvement in its long-term score for structural characteristics of the economy. It lies 3.1 points behind Egypt and 8.5 points ahead of Nigeria. Meanwhile, its petrochemicals-specific scores are benefitting from progress on the Arzew petrochemicals complex. On nearly every indicator, Algeria comes last by a long margin, expect when Nigeria scores worse, and this is likely to remain the situation until the Arzew complex comes onstream.
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