New Energy market report from Business Monitor International: "United Arab Emirates Petrochemicals Report Q1 2014"
Boston, MA -- (SBWIRE) -- 03/19/2014 -- Borouge is set to start operations at its new plants in Q114 at a time when Asia self-sufficiency is leading to a slowdown in export activity. Borouge 3 will add capacities of 1.5mn tonnes per annum (tpa) of ethylene, 960,000tpa polypropylene (PP) and 1.08mn tpa polyethylene (PE). The project also includes an 80,000tpa cross-linked polyethylene (XLPE) plant, which Borouge said will be a value-added complement to the 350,000tpa low-density polyethylene (LDPE) unit at the site. Unless external markets recover, the additional capacity will exacerbate the problems faced in 2013 when the industry was facing slowing Asian markets, moderating product prices and rising feedstock costs.
The UAE is likely to see tightening availability of ethane leading to a rise in feedstock costs. This will be tempered by the used of mixed-feed crackers in future petrochemicals projects, which should make use of naphtha produced by the country's expanding refining capacity. Major investment in offshore and onshore oil projects, as well as the development of new gas fields and downstream expansion, makes the UAE a focal point of activity in the region, with billions of dollars worth of projects underway. This should alleviate some of the feedstock challenges the industry is facing as it expands capacity over the next five years.
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- By 2016 BMI expects ethylene capacity of 5mn tpa in the UAE, up from 2mn tpa in 2013, with PE more than tripling to 3.52mn tpa and PP rising by nearly 170% to 2.14mn tpa over the period.
- In our view the worst is over in the UAE housing sector and we expect substantial increases in value over the coming quarters. This will have a noticeable impact on polymers used in construction, such as PVC and plastic piping.
- Retail spending will remain robust over the medium-term, providing a steady growth in consumption of a range of household goods, vehicles and packaging. However, the UAE's relatively small manufacturing base will mean that the domestic market for petrochemical products will represent a fraction of total the country's total petrochemicals output.
- In BMI's Middle Eastern Petrochemicals Risk/Reward Ratings matrix, the UAE has a score of 64.0 points out of 100, unchanged since the previous quarter. Previously, it had jostled with Kuwait for third place. However, while the UAE has undergone massive expansion, Kuwait has suffered as a result of policy reversals in the refining and petrochemicals sectors, which have affected its market risk score, and its overall country risk rating has fallen in line with global economic trends. This quarter, the UAE remains in second place, well clear of Kuwait, but it is unlikely to catch up with the regional leader, Saudi Arabia.
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