Boston, MA -- (ReleaseWire) -- 10/06/2012 -- The Kuwait Petrochemicals Report examines the impact of the slowdown in Asian markets on Kuwaiti producers and also on Kuwait Petrochemical Corporation's (KPC) plans to significantly boost ethylene and polyethylene capacities by 2016. The report looks at the fact there are too few domestic conversion industries, which absorb around 1% of total petrochemicals output, and the country's failure to add value and expand the product portfolio to improve petrochemicals margins.
Kuwait's output and product prices in 2012 are influenced by the Asian petrochemicals market, which is experiencing volatility because of the eurozone crisis and plant restarts. Exports to the Asian market were more constrained as Q212 progressed as production in Europe was absorbed by a seasonal rise in consumption and Indian activity slowed as a result of falling domestic naphtha volumes. Over the longterm, Chinese domestic ethylene capacity is expected to rise from an estimated 17.9mn tonnes per annum (tpa) at end-2011 to over 31.7mn tpa by 2016. This will force Kuwait to look to other markets to offload output.
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In India, the slow pace of capacity expansion will mean that the country's burgeoning domestic market will become more reliant on imports of basic chemicals and plastics, helping Kuwaiti exporters to offset some or all of the losses in the Chinese market. The Indian government forecasts domestic polymer demand will reach 11mn tonnes in 2015, up from 5.8mn tonnes in 2008. BMI believes the country will be unable to meet this demand without help from Middle Eastern producers such as Kuwait.
Over the last quarter BMI has revised the following forecasts/views:
- BMI maintained Kuwait's petrochemicals rating at 60.8 points this quarter. It remains in third place, 2.9 points behind the UAE and 0.7 points ahead of Qatar. By encouraging refinery capacity growth, establishing a declining naphtha-ethane differential and ensuring an improvement in the long-term risks, Kuwait has reversed the decline caused by the uncertainty over the future of the al-Zour refinery.
- Kuwait will need to look beyond basic chemicals and the Chinese market for growth in the future if it is to sustain operating rates and maintain margins at levels seen in 2011.
- The polypropylene (PP) sector, a sector in which Kuwait has a competitive advantage, will experience a challenging 2012 because Indian producers are set to add 900,000tpa of PP capacity.
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