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Qatar Petrochemicals Report Q1 2012
Business Monitor International, Nov 2011, Pages: 55
Business Monitor International's Qatar Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Qatar's petrochemicals industry.
The concentration of the Qatari petrochemicals industry in a narrow range of commodity chemicals and its high exposure to the Chinese market could reverse some of the success it has enjoyed in recent years, according to BMI’s latest Qatar Petrochemicals Report.
Qatar’s petrochemicals margins remained healthy in 2011, helping to sustain earnings growth throughout the year. By late 2011, petrochemical prices had returned to near pre-crisis levels, but worries persist over how a potential double-dip global recession may impact Qatari petrochemicals production. Qatar is highly exposed to the Asian market, particularly China which is its main customer. While China’s capacities are growing fast, BMI believes the Chinese market will slow down in 2012 as inflation rises and the government is forced to introduce more restrictive policies to dampen demand. Coupled with growth in output, measures to prevent over-heating will lead to a decline in imports and the potential for overcapacity in some segments.
Qatar may instead turn its attention to the Indian market, which is set for double-digit growth over the medium term. India is on course to become the third largest consumer market for high-tech plastics after the US and China owing to growth in the automotive industry, which is set to grow by more than 6% per annum. In the short term, the main engine of the economy – domestic demand – will be fuelled by rising private consumption and fixed investment levels, as well as the need to rebuild inventories, which should drive petrochemicals demand. However, capacity is not keeping up with the demands of the market, leading to a widening deficit that could help offset the decline in Chinese imports. In addition, reconstruction efforts related to the Japanese earthquake disaster could boost demand for Qatari exports.
Qatar’s competitive ethane-based production will lead to the shuttering of undersized petrochemical facilities in places such as Japan, North America, and Western Europe with rationalisation already under way and likely to accelerate in coming years. BMI also expects a rationalisation of the Chinese petrochemicals industry, which will have to address the problems of overstocking, lower than expected demand growth and a drastic increase in volumes from Qatar. Qatar’s main weakness is its dependence on commodity petrochemicals and a lack of high performance and speciality grades, which can add value to exports and put the industry in direct competition with producers in Japan and other more mature markets.
The effects of a previously reported problem for the industry – rising construction costs – are diminishing. The earlier rise in costs may have caused the delay or cancellation of some projects thus far, but it is likely that those already begun will be pursued. After construction costs peaked in the middle of 2008, investors are now assessing how best to take advantage of the changing development environment. BMI believes that two new ethylene projects could come online by 2016. By then, Qatar should have ethylene production capacity of 6.0mn tpa with 2.9mn tpa of PE capacity. However, the collapse of the Honam JV in April 2010 means that Qatar will remain without PP or PS facilities for the foreseeable proceed with production of PP means that Qatar will be unable to tap into the rapid growth in this segment.
Qatar maintains third place in the rankings for Middle East and Africa with 62.0 points, unchanged since the previous quarter. This puts it 1.2 points behind the UAE and 4.0 points ahead of Kuwait. Qatar’s progress in raising its petrochemical capacity could still falter due to rising construction costs and tightening lending conditions. Nevertheless, Qatar’s petrochemical-specific ratings are strong, with cracker capacity set to increase significantly over the next five years and the country hosting the second largest polyolefins production capacity in the GCC after Saudi Arabia.
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