Oil Prices Expected to Stabilize in Q2 2015

The Gulf petrochemical sector is shielded from any slump or deflation because supply levels still cannot keep up with current demand. This was the gist of extensive discussions on the impact of the falling oil prices on the petrochemical sector on the concluding day of ArabPlast 2015, the region’s largest petrochemical and plastics show.

It was further driven home that the sector has responded remarkably to the rising global demand by producing more than 150 million tons of petrochemicals over the past 25 years. 

Commenting on the co-relation between oil prices and petrochemical production, especially polymers, Fahad bin Abdullah Al Theban, General Manager, Gulf Polymers, said that oil prices have reduced polymer prices by 25 percent since the beginning of December.

Al Theban said that the decline in polymer prices could boost demand from countries such as China, India and some European and African countries. He explained that according to latest analysis, oil prices would climb higher in the second quarter of 2015, because the excess oil would have been consumed and global balance between supply and demand would be stabilized.

He added: “Demand for polymers in KSA is the highest in the Arab world, thanks to the large number of plastics conversion factories in the kingdom.” 

Experts said that the per capita consumption of polymers in the Gulf was 14 kg, against 28 kg in Western Europe. This gives a competitive edge to the industry globally.

There are 1000 plastic mills in the UAE, of which 20 invested $ 75 million to upgrade machinery last year, according to plastics machinery experts at the show.

Satish Khanna, General Manager of Al Fajer Information & Services explained: “Governments of GCC countries have taken active steps to promote plastic processing in the block through creation of industrial hubs and parks. The current unorganized market will see some consolidation in future as bigger participants cash in on this opportunity. This will boost the overall plastics industry and companies from the GCC can conveniently supply to global destinations in Europe, Asia, and Africa.”

While the future seems promising, a steady supply of cheap gas would not be possible at the current consumption rates in the near future. This could mean that the GCC will lose out on its cost advantage. Securing gas supply through new gas fields, obtaining future supplies through strategic collaborations with other regions, and building on innovation and functional capabilities would be key solutions.  

Jeen Joshua, Project Manager of Arabplast 2015, commented: “Machinery companies participating in the show further consolidated their regional network on the fourth day of the show that has become a much anticipated event by plastics experts every two years.”

The show has enhanced its global rank as one of the leading pertrochemicals and plastics events in the world, by playing a crucial role in bringing European, American and Asian plastics machinery technologies to the Middle East and North Africa.