Market outlook – Gulf States Gulf States Developing into Leading Global Chemical Hub

Editor: Marion Henig

According to a current market forecast, the Middle East will become the hub of global chemical production over the coming years. Will Sabic dethrone BASF, the current world leader in the industry?

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Camelot Management Consultants predict the Middle East to become the hub of global chemical production over the coming years. (Picture: Camelot)
Camelot Management Consultants predict the Middle East to become the hub of global chemical production over the coming years. (Picture: Camelot)

Dubai/Mannheim – The center of mass is shifting in the global chemical industry. Chemical production grew by nearly 40% over the past 10 years, but 95% of the increase took place in developing and emerging countries. The chemical industry in the Middle East stands at the forefront of these developments and will continue to expand by around 20% a year, making the Middle East the hub of global chemical production. Using turnover as the yardstick, Saudi chemical producer Sabic could draw level with or in the best case scenario even overtake BASF, the current world market leader, by 2015. This is the conclusion which Camelot Management Consultants have come to in their current market forecast.

With sustained growth rates exceeding 20% and an estimated investment volume of $170 billion over the next five years, the Middle East is on the road to becoming one of the world’s major chemical centers according to Dr. Josef Packowski, Management Partner at Camelot Management Consultants. The center of mass in the industry is shifting at a very rapid rate. According to Camelot, BASF anticipates that worldwide demand for chemical goods will expand by 8% between now and 2020 but that demand in Europe will decrease by 6%. Given the investment volumes, the Gulf Region will rapidly expand to become a major center of the worldwide chemical industry.

Sabic: Regional Chemical Champion on the Way to the Top

By the end of 2015, one of the two chemical companies with the world’s highest turnover could be based in the Middle East, namely Sabic. Dr. Axel Neidlein, Partner at Camelot Management Consultants, highlighted the impressive growth rate in the region. He pointed out that regional market leader Sabic is now reaping the benefits as a global competitor and went on to say that if recent growth rates are projected out into the future, in terms of pure chemical turnover Sabic could overtake BASF by 2015. Neidlein expects however that the growth curve at Sabic will probably flatten out somewhat over the next few years, reaching the $60 billion mark by2020. Whatever level may be reached by then, he says that the dynamics in the region are highly impressive and that they will have consequences for competitors in growth markets like APAC, China and the established markets of Europe and North America. Sabic has achieved all of this through organic growth along with mergers and acquisitions.

Neidlein added the following observations. Sabic naturally benefits from the geographical proximity to natural resources, but it also faces some challenges. The raw material advantage (ethane versus naphtha) is gradually eroding, and the Saudi government is hoping for success in downstream diversification into special chemicals. With its downstream initiative, the government intends to capture a higher share of the value-add chain and also create employment for its highly-qualified citizens. Neidlein takes the view that if the government wants to establish the region as the world’s leading chemical center, it will have to force the pace of downstream differentiation, attract more international investors and create jobs. He sees human resources as the key factor in an economy which is becoming more dependent on innovation and expertise than on oil and gas.

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