The Arabian Gulf petrochemicals industry in 2021-2022 is poised to register growth in output, sales and international trade, according to the Gulf Petrochemicals and Chemicals Association (GPCA).

The increase in regional economic activity, supported by a rapid vaccination roll-out, as well as the global economic rebound, will support the recovery in the region’s chemical industry, it said in a statement.

Gulf Cooperation Council (GCC) economies – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE – are expected to post an aggregate growth of 2.2% in 2021, buoyed by the global economic recovery, projected at 5.6% and the revival of global oil demand and international oil prices, according to World Bank estimates.

For the whole of the Middle East, the International Monetary Fund (IMF) in its latest World Economic Outlook report forecasts a 2.7% GDP growth for 2021, rebounding from the 4.0% contraction recorded last year. (Please see interactive below)

The region is home to major global oil producers, which have recently adjusted up output amid strong crude prices.

Brent crude rose in early November to a three-year high at above $86/bbl.

Saudi Arabia, which is the world’s largest oil producer, accounts for about 15% of global crude output and is the de facto leader of oil cartel OPEC.

“Higher oil output combined with an improved oil price outlook are boosting fiscal revenues in the region, as hydrocarbons generate significant revenue for the GCC,” the GPCA said.

“This, combined with strong economic and manufacturing activity in China, which represents the GCC’s largest export market, GPCA forecasts a healthy chemical and petrochemical GCC market outlook, which will spill into 2022,” it said.

Supply chain delays and disruptions, however, will likely persist, leading to an increase in the cost of commodities, including some of the chemical industry’s key raw material coasts.

“With higher oil prices, feedstock prices are expected to remain elevated, and margins to decrease,” the GPCA said.

The region’s chemical industry is emerging from a period of significant disruption subdued growth and an unprecedented decrease in consumer demand in a range of end-user sectors, GPCA secretary general Abdulwahab Al-Sadoun said.

“The Arabian Gulf region is now entering into a gradual recovery which will require it to maintain resilience and keep production output high in order to cater to end-user markets at home, in Asia and the world,” he said.

“Beyond maintaining operational and supply chain resilience, the next big imperative for GCC producers will be to deliver on their sustainability objectives, including lowering emissions, investing in innovative technologies, driving partnerships across the value chain to reduce their environmental footprint and that of their products, and advancing the plastic recycling agenda,” Al-Sadoun added.

The GPCA Annual Forum with the theme “‘Redefine. Reshape. Reinvent. The Chemical Industry in a Post-Pandemic Reality” will take place on 7-9 December in Dubai, the UAE.

Marex Media