GCC polypropylene market continues upward trend

The overall plastic consumption in the Gulf Cooperation Council (GCC) areas, dominated by polypropylene (PP) and polyethylene (PE) is expected to increase by about 8% over the next five to seven years, with growth prospects in construction and packaging sectors on the forefront in terms of demand.

Applications of PP in the GCC countries are predominantly in the manufacturing of bi-axially-oriented polypropylene (BOPP) and cast polypropylene (CPP) films that are used as a packaging material in multiple industries, with injection moulding grade used primarily in making household articles and furniture yarns for manufacturing carpets. Other applications and uses for PP are geotextiles, woven bags, amongst others.

According to a study by Grand View Research, Inc., global bio-based PP market demand was 11.22 kilotonnes in 2013 and will reach 16.03 kilotonnes by 2020, growing at a CAGR of 5.8% between 2014 to 2020. Global bio-based PP market is expected to reach $36.19 million by 2020.

Polypropylene, a thermoplastic polymer, usually synthesized by chain polymerisation of propylene gas, is mainly produced in the Kingdom of Saudi Arabia and United Arab Emirates. Saudi Arabia accounts for more than 75% of the total polypropylene produced in GCC followed by UAE with about 15%. The GCC has about 6.5 million metric tonnes (MT) installed capacity which is operated at a utilisation rate of approximately 80%. The total production accounts to about 5.2 million MT. The demand for polypropylene in GCC is about 0.7 million MT per annum, which is mostly satiated by the local production. Of the total polypropylene produced in the GCC, more than 85% is exported. The key export partners are China, Iran, India, Pakistan and the United States. Currently, the demand is experiencing moderate growth owing to the focus on export of value-added downstream products made from polypropylene.

Expansion of installed capacities "There are about eight to ten key manufacturers of polypropylene in the GCC, most of which are based out of the KSA, which holds about 7% of the total installed capacity, followed by the UAE with about 7%. Kuwait and Oman contribute the remaining 7%. Saudi Basic Industries Corporation (SABIC), National Petrochemical Industrial Company (NATPET), Advanced Petrochemicals Co. (APPC), National Industrialization Co. (TASNEE), Sahara Petrochemicals Company, Rabigh Refining & Petrochemical Co. and Saudi Polymer Company are the key companies based in the Saudi Arabia; Borouge Pte Ltd (Borouge), Petrochemical Industries Company K.S.C (PIC), and Oman Polypropylene LLC (OPP) are located in UAE, Kuwait and Oman respectively. Of all these top manufacturers, the market is led by SABIC with about 33% of share in production which has an installed capacity of almost 2.1 million MT," according to Govind Ramakrishnan, Consultant Chemicals, Materials & Food Practice, Frost & Sullivan.

TASNEE and Borouge with more or less equal share of 11-13% have an installed capacity of 0.7 and 0.85 million MT, respectively. Other notable manufacturers such as NATPET, Petro Rabigh, APPC and others hold more or less equal share and would typically be less than 10%. Saudi Polymer Company is a relatively new entrant to the market, which commenced production by the end of 2012. "The market has witnessed significant capacity expansions since 2012 owing to the augmentation of global demand of polypropylene, with GCC being one of the key suppliers. There have been many announced expansions by Borouge, NATPET etc. which are expected to be operational by 2018. Other companies like Qatar Petroleum, Abu Dhabi National Chemicals etc. have opted for joint ventures or mergers to foray into this market,"according to Mr. Ramakrishnan.

The polypropylene market is currently oversupplied by more than 4.5 million MT considering its domestic demand of 0.7 million MT. But GCC is considered to be a key export hub for polypropylene, supplying mainly to Northeast Asia and the United States. The production growth of the region is mainly driven by the global demand of polypropylene and downstream products. The imports of polypropylene into the GCC is minimal at present with less than 10% of the total demand addressed by imports in 2013. The local demand is mainly contributed by the demand for carpet yarns and packaging films, as the conversion facility of the same is well-established.

Polypropylene demand in the GCC is mainly driven by the demand growth for downstream products such as PP film, PP fibres, raffia and others. Mr. Ramakrishnan believes that the future of polypropylene can be predicted based on the trends in end-user market. "The PP film market demand is influenced by the growth in population and augmented disposable income that surge the demand for packaged Fast Moving Consumer Goods (FMCG).

Carpet yarns demand is surging with the increasing construction activities in offices, residential zones, hotel establishments and other infrastructure activities. In addition to the above trend, the fact that the Saudi Arabia is the third largest consumer for carpets in the world would substantiate the dominance of carpet yarn segment in the region," he added.

Demand for PP non-wovens is largely driven by increasing preference for local population for a shift towards hygiene products, such as baby diapers and adult incontinence products. Demand for woven bags, on the other hand, is mainly driven by the cement and fertiliser industries in the GCC. With increase in capacity of fertilisers and its related expansions in Saudi Arabia and Qatar in the future, an upsurge is anticipated for the woven bags segment. Additionally, forthcoming huge infrastructure projects will lead to a rising demand for cement and other construction products.

Augmenting and supporting downstream industries by the GCC states' government to diversify economy and increase job opportunities will further fuel the growth of polypropylene downstream industry. Saudi Arabia and UAE will take the lead in growth of the polypropylene industry owing to its large production capacity and proposed growth in downstream sectors.