The rapid rise in Middle Eastern petrochemical capacity in the next five years may not have a very large impact on Asian resin markets, as per plasticsnews. The sizeable increases in Middle Eastern capacity with feedstock cost advantages are expected to flood Asian markets. However, a huge rise in Middle Eastern capacity over the next five or six years will not affect Asian economies as much as anticipated. More of the new Middle Eastern capacity will be used locally, as countries in the region pursue industrialization to move further downstream the petrochemicals chain. Also, there is an increasing interest on part of Middle Eastern petrochemical firms to move away from commodity materials into higher value plastics. Some of the Middle Eastern petrochemical firms are also faced with rising construction and financing costs that is changing some of the economics of their projects and causing delays as companies are forced to refinance. This could result in Chinese resin makers remaining competitive in their domestic markets, when shipping costs and possible Chinese subsidies are factored in. Northeast Asian producers in Japan and South Korea could also lose out from the new Middle Eastern capacity.
Petrochemical firms in the U.S. Gulf Coast and in northwest Canada are currently major exporters to Asia, and they have been able to pick up their exports as Asian demand rose rapidly after the financial crisis. North American petrochemical makers could stand to lose significantly in Asia from the new Middle Eastern capacity. 20% of Dow Chemical Co.’s Q4-2009 production was exported from the United States to China. North American firms that can use natural gas as a feedstock are enjoying a sizable cost advantage now because of new technology in the United States for horizontal drilling — called fracking-is significantly increasing the amount of natural gas available and lowering the cost. But that cost advantage is expected to narrow in 2011 and those exports are expected to decline as Asia becomes more self-sufficient in petrochemical capacity.