GCC governments endeavour to expand polyolefins market

20-May-09

The Gulf Cooperation Council (GCC) has embarked on a capacity-expansion drive in the polyolefins market to realize its ambition of becoming a major global polyolefins production hub as per Frost & Sullivan. Based on the planned addition of new capacities, the region is expected to witness a surplus glut by end of next year. The governments in the GCC are looking to take advantage of the low costs and abundant feedstock in the region to promote downstream industries for further diversification and development. As the GCC polyolefins market is a low-growth, low demand one, the additional capacities are expected to create a surge in the demand for polyethylene and polypropylene in the GCC. Polyolefins market in GCC grew at 4.9% in 2008 as per Frost & Sullivan. With the governments promoting investments, there have been numerous joint ventures of foreign companies with local establishments in the GCC. The influx of more funds has further catalyzed the creation of new capacities, which are anticipated to be functional by 2010. The overcapacity is a boon to the polyolefin market because its end-user industries are largely still developing. Tepid domestic demand, coupled with the current economic downturn, is likely to result in a lackluster 2009. However, as the planned capacities turn operational and end-user industries start maturing, the market is likely to experience moderate growth. The low local demand for and export of finished polyolefin have squeezed market participants' profit margins, especially because it is a price-based market.