Top Ten Trends in the Petrochemical Industry in 2011

1. Top Ten Trends in the Petrochemical Industry in 2011

2. Petrochemicals Capacity Will Continue to Migrate to Low-Cost Locations The North American petrochemical industry has traditionally held the number one position in global petrochemical production as well as exports. The North American petrochemical industry has gone through several phases in its lifecycle, starting from its initial growth and capacity expansions to a stage of reduced marginal returns that led to it dealing with a possible slump. The recent slowdown in the North American petrochemical industry has been brought about by the increase in competition from price-competitive producers in the Middle East and Asia. The opportunities for US commodity plastic exports, for instance, have reduced. This is because a large volume of Middle East plastic export capacity with a significant cost advantage is displacing other exporters in China,the US, Korea and Japan. Another major reason is the resource constraints and high feedstock prices in North America. The rising feedstock prices are forcing many North Americanpetrochemical producers to reassess their profit margins in comparison to that of global players. The capacity additions in the global petrochemical industry are increasingly favoring Asia-Pacific and Middle Eastern locations. The major reason for this shift is the economies of production in these regions. The Middle East has an unparalleled feedstock advantage and Asia-Pacific countries like China and India offer very low labor costs compared to North American and European countries.

3. Coal Will Grow as a Key Feedstock for Petrochemicals Production The major feedstock for petrochemicals production has historically been naphtha and natural gas. Coal and Liquefied Petroleum Gas (LPG) is also used in the production of petrochemicals. However, the use of coal as a feedstock for petrochemicals is becoming popular exceptionally quickly in China. There are two main drivers behind the push for more coal-to-gas projects in China. One is the soaring demand for gas due to urbanization and environmental concerns, and the other reason is that China has plenty of coal, while oil and gas are in short supply. China is the biggest producers of many petrochemicals in the world. The increasing use of coal feedstock in China is continuously increasing the share of coal-based petrochemicals production globally. For further details, please click or add the below link to your browser: http://www.gbiresearch.com/Report.aspx?ID=Top-Ten-Trends-in-the-Petrochemical-Industry-in-2011&ReportType=Industry_Report&Title=Chemicals China has, in the past few years, focused on developing coal-based liquid fuels as raw materials in order to reduce its dependency on imported oil. With rising crude oil prices the Chinese government has been eager to find ways to reduce oil imports. China has huge reserves of coal and is the largest producer of coke in the world. Coke is produced by three types of producers in China: captive coke production plants of iron-steel makers, coke plants of chemical producers,

4. and dedicated coke producers. The country has around 5,000 producers of coke with nearly 800 of them having a large capacity. Due to the availability of low cost coal in the country, it had been easy for many petrochemical manufacturers in the country to adopt coal-based raw materials. China Will Lead the Demand Growth of Petrochemicals Globally China has emerged as the biggest petrochemical market in the world. Petrochemical demand growth is closely associated with the economic growth of a country, and China is the fastest growing economy in the world. The GDP of China is growing at a rate much higher than that of most other economies of the world. The country has successfully maintained its 8% growth despite the impact of the global financial slowdown, while most large economies in the world have witnessed a downturn. With a growing economy, rising per capita income in the country also helps the petrochemical market to grow. Demand for petrochemicals in China is also rising, with growth in the infrastructure and construction industry, packaging industry, textile industry, automotive industry, the consumer goods and electronics markets, and many other industries which are major markets for petrochemicals. The rapidly growing packaging industry of China plays an important role in the growth of plastic processing industry and the demand for petrochemicals in the country. The contribution of the construction industry to China’s GDP also

5. continues to grow. The growing infrastructure in China is strongly driving the demand for petrochemicals. The strongest growth was observed in the market for Polyvinyl Chloride (PVC), which is a very important chemical in the construction sector, used largely for making pipes, window frames and sidings. The increasing demand for PVC also, in turn,drives the demand for Vinyl Chloride Monomer (VCM) and Ethylene Dichloride (EDC) in the value chain. For further details, please click or add the below link to your browser: http://www.gbiresearch.com/Report.aspx?ID=Top-Ten-Trends-in-the-Petrochemical-Industry-in-2011&ReportType=Industry_Report&Title=Chemicals Packaging Industry Will Contribute to Global Demand Growth for Major Petrochemicals With the growing emphasis on the look and appeal of the products, the packaging industry has grown rapidly in the last decade. Producers across different industries have grown keen on enhancing the packaging of their products. The packaging industry is scaling new heights, not only in terms of revenue growth, but also in devising new technologies, designs and aesthetically enhanced packaging solutions. The plastic packaging industry is the leading end-use market for many petrochemicals in the world.

6. The global plastics packaging industry is large and growing strongly. The major force driving the consistent growth of the plastics packaging industry is the simultaneous growth in the industries which consumes plastic packaging products. As the different market needs grow, the packaging needs of their products grow as well. Of these packaging needs, a few have been particularly popular, such as improved barrier properties. This growth trend, combined with current consumer life-styles and a growing demand for ready-to-eat packaged products, have resulted in a surge of demand in the packaging industry. Feedstock Advantage Will Encourage Growth in the Downstream Petrochemical Industry in the Middle East The Middle East is witnessing rapid growth in its petrochemical industry, which is benefiting from the availability of its vast oil and gas reserves. The region has about 67% of the world’s oil reserves and 45% of the world’s natural gas reserves. These abundant resources have provided the Middle East petrochemical industry with feedstock and energy at much lower prices than in other regions of the world. The feedstock cost of the Middle East producers for most petrochemicals is almost one fifth the feedstock cost available to producers in Asia-Pacific and Europe. Nationalized upstream oil and gas production allows downstream petrochemical producers to obtain gas streams at highly discounted prices.

7. Middle Eastern governments have been encouraging petrochemical producers to diversify their derivatives portfolio to capture the complete petrochemical value chain. The governments hope that by producing a broader range of petrochemicals, the downstream manufacturing industries will similarly broaden and this will create more employment for the local population. The Saudi Arabian government is also supporting new investments downstream of the basic cracker derivatives, in an attempt to diversify the economy and create more jobs. For further details, please click or add the below link to your browser: http://www.gbiresearch.com/Report.aspx?ID=Top-Ten-Trends-in-the-Petrochemical-Industry-in-2011&ReportType=Industry_Report&Title=Chemicals The Increasing Crude Oil Prices Will Lead to Rise in Petrochemical Prices Typically, petrochemical prices are determined by adding the production costs of producers to the margin sustained by them. Production costs are heavily influenced by the raw material costs and the prices of the majority of petrochemical feedstock directly track the crude oil price trend. As a result, the price of crude oil is of critical importance to petrochemical producers. The price of crude oil, thus, heavily influences the raw material costs of the production of petrochemicals. The price of crude oil and the growth rate of the global economy potentially have the greatest influence on the future performance of the petrochemical industry. Crude oil prices are expected to continuously

8. grow in the coming years. This will lead to a steady rise in the prices of petrochemicals. Growing Carbon Emissions and Strengthening Regulations Restricts the Industry Growth The global petrochemical industry contributes severely to air pollution. Petrochemical plants pose a variety of environmental threats due to greenhouse gas emissions, disposal of wastes, health hazards and the risk of catastrophic accidents. The major air pollutants produced by the petrochemical industry are smoke, particulate matter, hydrocarbons, oxides of sulfur and nitrogen,carbon monoxide, and malodorous emissions. They may arise from storage areas, individual processes, operations, leakage and the use of fuel for production and the refinery’s own heat and power. With the growth in production of petrochemicals, the greenhouse gas emissions produced by the industry are growing too. Carbon dioxide gas emissions have a very high correlation of 99.7% with the global petrochemicals production. North American and Western European Petrochemical Demand Will Continue to Lag The North American and Western European demand for petrochemicals is witnessing a slowdown. Petrochemicals consumption is generally a function of

9. GDP and the economies in the developed regions of the world have faltered in the recent past. The impact of economic downturn has been the greatest in the US and Western Europe. Many industries, such as the construction industry and automotive industry, have suffered a significant downturn in these countries. Overall consumer spending was also affected. As a result, the demand for petrochemicals in major end-use markets declined. The collapse in petrochemical demand and a loss of business confidence also triggered industry wide de-stocking, and drastic cutbacks in petrochemical production in North America. The reason behind the slow recovery of petrochemicals demand is the maturity of the market in developed countries compared to other countries. The demand for petrochemicals in developed countries is already close to saturation level. The per capita consumption of petrochemicals in these countries is already very high compared to other countries, leaving very little scope for further penetration or differentiation in the market. The sluggish demand, together with economic constraints and increasing competition, has recently compelled the producers in North America to reduce their petrochemical production to enhance capacity utilization and to restore profitability.

10. For further details, please click or add the below link to your browser: http://www.gbiresearch.com/Report.aspx?ID=Top-Ten-Trends-in-the-Petrochemical-Industry-in-2011&ReportType=Industry_Report&Title=Chemicals The Petrochemical Industry in North America and Western Europe is Expected to Move Towards Consolidation The petrochemical producers in North America and Western Europe are facing difficulties in enhancing their profitability. With limited supply and high prices for feedstock, it has become difficult to improve competitiveness against the producers of Asia-Pacific and the Middle East, who have the advantage of lower feedstock prices and cheaper labor. North America and Western Europe have suffered a greater impact in the global economic downturn than other regions. This has led to a slowdown in various industries which consume petrochemical products, in turn, degrading the profit margins of the petrochemical industry. Also, the demand for petrochemicals in the countries of these developed regions has reached a saturation level. Due to the saturated markets and low competitiveness facing the producers in North America and Western Europe, a consolidation trend can be foreseen in the petrochemical industry in these regions. Relatively smaller companies are expected to be slowly acquired by the bigger ones in the long term. This

11. indicates that the number of mergers and acquisitions are expected to grow in North America and Western Europe. Increasing Capacity Will Lead to Enhanced Competitiveness of Asian Companies Asia-Pacific’s petrochemical companies are gradually proving to be more profitable than their American or European counterparts. Rapidly growing domestic demand, the availability of cheap labor and proximity to the oil-source countries of the Middle East have helped improve the profit margins of Asia-Pacific petrochemical producers. The export market of these petrochemical producers is also expanding rapidly. The Asia-Pacific petrochemical industry is witnessing rapid expansion in Asia-Pacific. In order to increase their global market share, the large petrochemical producers of the region are focusing on building capacity. Some producers are investing in new facilities while some are investing in capacity addition to existing facilities. GBI Research, a leading business intelligence provider, has released its latest research, “Top Ten Trends in the Petrochemical Industry in 2011”. The report provides detailed insight into the global petrochemical industry trends. It contains a detailed analysis on the capacity migration to cheaper destinations. It discusses the emergence of Middle East as a global supplier and China leading the global demand. The report analyses the beginning of a consolidation

12. trend in North America and Western Europe and growing competitiveness of the Asian and Middle East suppliers.The study discusses the emergence of coal as a key feedstock for petrochemical production and the role of packaging industry in the demand growth. The report also includes price trend analysis and the increasing impact of carbon emissions on the petrochemical industry. For further details, please click or add the below link to your browser: http://www.gbiresearch.com/Report.aspx?ID=Top-Ten-Trends-in-the-Petrochemical-Industry-in-2011&ReportType=Industry_Report&Title=Chemicals Visit our report store: http://www.gbiresearch.com For more details contact: pressreleases@gbiresearch.com North America: +1 646 395 5477 Europe: +44 207 753 4299 +44 1204 543 533 Asia Pacific: +91 40 6616 6782