As we look back on the last 12 months, we observe the following key trends taking shape and impacting the industry’s profitability and opportunities for future growth: geopolitical tensions, growing trade protectionism, slowing demand growth, and growing self-sufficiency of key chemical markets. These trends are unfolding as a result of a renewed economic slowdown, with 2019 consistently being described as the most challenging year for the global economy since the great financial crisis of 2008.Healthy industry picture
Contribution of the chemical industry to regional GDP increased by a healthy 2.8%. In addition, 13.3 million tonnes of new chemical production capacity was added in the region.
Saudi Arabia maintained its exceptional standing, retaining its spot in the top ten exporters of chemicals today globally. It is also the region’s powerhouse, with the largest volume output and chemical sales revenue. In 2018, Saudi producers generated $62bn in revenue. The Saudi chemical industry is also a champion in terms of portfolio diversification, with GPCA member companies in Saudi Arabia producing as many as 126 products with a total capacity of 119.2 million tonnes.Furthermore, employment in the GCC chemical industry increased by 157,000 in 2018, with the UAE being the second largest employer gaining approximately 18% market share in regional employment in the chemical sector. Against the backdrop of the positive price trends in fertiliser and polymer products, revenue trends in the UAE increased by 28.4%. In 2018, the UAE chemicals output was 14.5 million tonnes, with basic chemicals representing one third (33%), followed by polymers (28%) and fertilisers (30%).
Bahrain’s chemical sector achieved the highest revenue growth of 39% in 2018, attributed primarily to higher revenue from fertiliser products. Bahrain’s production capacity reached 1.4 million tonnes and achieved a revenue of $327mn in 2018.Kuwait achieved the second highest chemical revenue growth of 32% in 2018. With industrial expansion being a top priority as part of the long-term development priorities in Kuwait’s 2035 strategy, this achievement further cements its position as a global centre for petrochemical production.
Driving sustainability in the region and globally
Besides adding new capacity, the drive toward sustainable production took prominence, with producers, NGOs, brand owners, technology providers and governments coming together to address the growing plastic and waste management challenge. Some of these key initiatives include the Alliance to End Plastic Waste (AEPW), involving over 40 global companies, some of which are GPCA members; Coalition CIRCLE (the Coalition of Innovation in Recycling towards a Closed Loop Economy, aimed at transforming the infrastructure of packaging in the UAE); and the Basel Convention, signatories of which are the governments of 187 countries globally – all aimed at combating the waste challenge and building a more sustainable future for plastics.
Record chemical industry investment
As far as the chemical industry in the Arabian Gulf is concerned, the last 12 months were underlined by a wave of chemical investments, the total value of which exceeded $140bn in the first ten months of 2019. These were led by consolidation, joint venture agreements and increased number of merger and acquisition (M&A) deals.
Looking to the future, key drivers for chemical growth will remain intact despite economic instability. To win in the next frontier of global demand growth, regional chemical producers will need to remain focused on realising growth through restructuring and consolidation; developing robust business models and generating shareholder returns; improving their competitiveness and diversifying their revenue streams.
The mobility megatrend also offers strong growth opportunities, driving demand for high performance plastics, automotive catalysts, and battery materials. This in turn is creating a need for accelerating innovation and developing home-grown and integrated technologies.
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