Global Economic Uncertainty Is Negatively Impacting The Petrochemical Sector

The continuing global economic uncertainty is negatively impacting the petrochemical sector of Saudi Arabia, according to a report released by NCB Capital, MENA Financial Network reported.
 
The increase in prices of Saudi petrochemical products is being obstructed by weak demand and increasing supply. Operational inefficiencies at new plants also add to the weak performance of the Kingdom’s petrochemical sector, according to the report.
 
The report forecasts the Chinese petrochemical demand to remain weak in short term, owing to slowing domestic demand and reduced industrial activities. In 2011, Chinese GDP grew by 9.2 percent, but it is expected to grow by 7.8 percent and 8.2 percent respectively in 2012 and 2013.
 
According to the analysis, excess supply will put pressure on prices. It is because three new petrochemical projects started their commercial/trial operations in second half of 2012. These include projects of Petrochem’s Saudi Polymers Company, and LDPE facilities of Industries Qatar and Saudi Kayan.
 
Secondly, the GCC’s annual petrochemical capacity is likely to increase by 19.4 percent from 121 million tons in 2011 to about 145-146 million tons in 2016. This will lead to an increased supply and put pressure in the long-term and hence, prices of petrochemical products are likely to dip by 5-10 percent year-on-year in 2013.
 
However, prices of few petrochemical products such as ethylene glycol and polypropylene are forecasted to remain flat owing to strong demand for these products from the textile industry, the report states.