FYI
Nawaf Y. Husein
Faculty Member
Msc, CRP , CLBB
Saudi Training Society Member
Institute of Banking
Saudi Arabian Monetary Agency ( SAMA)
P.O.Box : 10820 Riyadh 11443 Saudi Arabia
Tel : + 966 1 463 3000 Ext. 3825
Fax: + 966 1 466 2368
Mobile : + 966 55 48 44 828
SKYPE : abuhejleh2
Dear Readers,
Please find attached our latest In-Focus report: The Saudi Healthcare Sector.
Executive Summary
§ Saudi Arabia's vast reserves of cheaply extractable feedstock, proximity to Asian markets, and supportive government policies give its Petrochemical sector a competitive advantage in the global market.
§ The global economic crisis reduced the global demand for all petrochemicals and their derivatives, thereby causing prices to plummet. High-cost producers around the globe were squeezed out.
§ Domestic producers were not immune to the economic crisis. The decline in global demand and oil prices lead to reduced earnings. The crisis also showed the growing dominance of Saudi producers as their margins allowed them to ride out this period of weakness relatively comfortably.
§ The slowdown has also created a supply glut with large scale capacity expansions in 2009 and 2010 from the Middle East and Asia, expected to come onstream post 2012.
§ Global olefin and derivative consumption is forecast to have recovered in 2010 as demand from Asia, particularly China and India, accelerates. This resulted in the expansion of production in 2010, thereby raising exports by 13% to 31 million tonnes Furthermore, political turmoil in the MENA region is expected to increase oil and petrochemical prices in the short term.
§ By 2015, we forecast Saudi petrochemical production will expand by 32% from 2009 levels of 53.2 mntpa to reach 70.2 mntpa, accounting for 9.2% of global supply.
§ The capacities of ethylene and polyethylene are forecast to grow by 45.6% and 11.2%, respectively, to reach 17.38 mntpa and 5.45 mntpa by 2015. Meanwhile, the capacities of propylene and polypropylene are expected to expand by 44.6% and 118.7%, respectively, to reach 5.09 mntpa and 7.92 mntpa by 2015. Although there are no plans to increase the methanol capacity of 5.36 mntpa, investments have been made to diversify into its derivatives.
§ There are currently 62 projects ongoing in the Saudi petrochemical sector valued at roughly SAR236 billion (USD63 billion). The highest value and volume of forecasted petrochemical contract awards is in 2011 at SAR124 billion (USD33 billion) and 23 projects; implying faster industry growth and project development post 2014.
§ Projects are funded through a variety of debt and equity combinations; including loans from domestic and international banks, the Saudi Industrial Development Fund (SIDF) and Public Investment Fund (PIF), export credit agencies as well as sukuks.
§ The sector is likely to face a few challenges in the medium term: (1) shortage of skilled labor force; (2) scarcity of ethane; (3) sustainability of demand recovery in the Chinese market; and (4) anti-dumping duties.
§ However, the benefits of the Kingdom's sustained expansion and diversification of its petrochemical output far outweighs the industry's challenges.
Best regards,
NCB Economics Department
PO Box 3555, Jeddah 21481
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