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Boston, MA -- (SBWire) -- 09/26/2013 --BMI View: Kuwait's petrochemicals industry will remain highly exposed to the Asian market, particularly that of its main customer, China. While China's capacities are growing fast, BMI believes the Chinese market is slowing as inflation rises and the government is forced to introduce more restrictive policies to dampen demand. Coupled with growth in output, measures to prevent overheating will lead to a decline in imports and the potential for overcapacity in some segments.

Kuwait may turn its attention to the Indian market, which is set to record double-digit growth over the medium term. India is on course to become the third largest consumer market for high-tech plastics after the US and China, owing to growth in the automotive industry, which is set to expand by more than 6% per annum. In the short term, the main engine of the economy, domestic demand, will be fuelled by rising private consumption and fixed-investment levels, as well as the need to rebuild inventories. This should drive petrochemicals demand. However, capacity is not keeping pace with the demands of the market, leading to a widening deficit that could help offset the decline in Chinese imports.

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Over the last quarter BMI has revised the following forecasts/views:

- The Kuwaiti economy will remain on a moderate expansion path heading into 2014, with growth supported by robust private consumption and a modest rise in oil production and exports. We forecast real GDP growth of 3.0% for 2013, slowing slightly to 2.6% in 2014, with strong performance in retail that will lead to an increase in finished plastic consumption.
- A poor investment climate will militate against the development of downstream conversion industries with a meagre amount of local petrochemicals production absorbed by the Kuwaiti market. However, although Kuwait is dependent on costlier naphtha feedstock, cracking heavier hydrocarbons will provide opportunities for a more diverse product range through co-products that it has, as yet, failed to fully exploit in downstream processing. By sourcing naphtha from domestic resources the country still has an edge over most Asian producers and Kuwait remains competitive globally, even if it has failed to add value to production and move beyond its slim portfolio. On the downside, producing relatively lowmargin products limits the range of markets it can tap.
- Kuwait's petrochemicals rating is 60.5 points this quarter, unchanged since the previous quarter. However, it has risen from fourth to third place as a result of a fall in Qatar's score. As a result, it lies 0.1 points ahead of Qatar and 3.5 points behind the UAE.

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