China will be the principal driver for global light olefins demand up to 2020 as per a report by Research and Markets. The rapid increase in downstream capacity additions of polyethylene and polypropylene, two of the largest end use segments of light olefins, and the fast growth of exports were the main drivers of light olefins demand in China. The Chinese government is currently undertaking a US$600 bln investment program to develop infrastructure in the interior of China, which will be the main driver of light olefins demand in the future. Although China has large light olefins capacities coming online in the next few years, the country will emerge as the largest importer of light olefins in the world. The Chinese light olefins demand will grow by 15% pa and account for 51% of the global light olefins demand in 2020.
Large scale constructions in Iran and Saudi Arabia will drive light olefins demand in the Middle East. The growth in demand for light olefins in the Middle East region was phenomenal during the last decade. Demand was driven by large scale polyolefins construction projects in Iran, Saudi Arabia and UAE, countries that have benefited from the high oil prices in the past few years. These countries have undertaken large multi-billion dollar projects to develop their physical infrastructure and encourage industrialization, and the construction of polyolefins projects form an integral part of that strategy. Polyolefins projects will drive the growth of light olefins demand in the region, which will account for 14% of the light olefins market in 2020. Light olefins demand will be stagnant in the developed markets of North America and Europe. Over 45% of the global light olefins demand comes from the developed markets of North America and Europe but the demand from these two regions is expected to remain stagnant to 2020. The absence of capacity additions in the downstream processing sectors, competition from cheap imports and the slowdown in construction and industrial activities are the main reasons for the bleak demand outlook in these regions. North America accounted for 26% of the global light olefins demand in 2008, and according to estimates it will account for only 18% of the global light olefins demand in 2020. The economic recession in the US is the main reason for the light olefins demand stagnation in North America. Europe accounted for 20% of the global light olefins demand in 2008. According to the report estimates, this will reduce to 15% of the global light olefins demand in 2020. The economic slowdown in large economies such as Germany, the UK and Italy is the main reason for light olefins demand stagnation in Europe. Growth from the Central and Eastern European countries will not compensate for the decline in industrial and construction activity in the major economies of Western Europe.
The current low per capita consumption of light olefins and the greater rate of economic development in the fast growing developing countries of China, India and Brazil are driving the global demand for light olefins. The rapid development in these countries is driving the demand for polyolefins, which are extensively used in the packaging and construction sectors. A significant proportion of the population in these developing countries lacks basic infrastructure including housing, potable water and sanitation facilities. The work undertaken by these countries to address this situation will drive the demand from piping applications and the development of organized retail industries in these countries will increase the demand for packaging applications, one of the largest end use industries of polyolefins.