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Petrochemicals in 2030

Strategies for a Post-Abundance Future of Petrochemicals

| Editor: Alexander Stark

For the period 2020 to 2030, McKinsey anticipate fewer truly advantaged investments and a step change in industry conduct. (sample image)
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For the period 2020 to 2030, McKinsey anticipate fewer truly advantaged investments and a step change in industry conduct. (sample image) (Source: Pixabay / CC0)

Location has been the key to success in petrochemicals: playing in emerging markets and accessing cheap feedstock. As the industry shifts, companies will have to work harder on core capabilities and strategy, a study published by McKinsey reveals.

New York/USA — Over the past few years petrochemical companies have been reporting record profits. Nevertheless, the industry is in a period of profound transition. McKinsey reports that until the fall in oil prices, success in the industry had been based on stark regional asymmetries. Companies in fast-growing emerging markets such as China have thrived. So have companies in regions — in particular the Middle East and North America — with advantaged gas feedstock that they have made into petrochemicals and plastics and then exported to China and other growth markets.

The study is taking a look ahead to 2030, when slower demand growth in emerging economies and less abundant advantaged feedstocks are likely to undermine these value-creation strategies. Companies will likely have to take a more disciplined approach to capacity additions, returns may be more modest, and all petrochemical players will need to work much harder on core capabilities and strategy.

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Future strategies will include using digital and advanced analytics to reach a new level of productivity, and attaining higher capital productivity on the industry’s large-scale projects. Companies must also work on reinventing the interface with oil refining as the gas-driven era winds down. At the same time, they will need to manage the transition from an essentially linear economy, where plastics-based products get used once before disposal, to a circular economy.

Read the full study: Petreochemicals 2030

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