BLOG: Winners and losers as demographics, debt, sustainability … – ICIS

SINGAPORE (ICIS)–Click here to
see the latest blog post on Asian Chemical
Connections by John Richardson.

Today’s blog is an Executive Summary of the new
petrochemicals landscape being shaped by
demographics, debt, sustainability, geopolitics
and a major shift in feedstock advantage. This
is the result of six months of travel and Teams
discussions.

In later posts, I will go into more detail on
these themes.

I see the winners being producers in Saudi
Arabia, the United Arab Emirates and Qatar
because they have the cost advantages
(including Saudi Aramco’s crude-to-chemicals
technologies) to gain big shares of the
deep-sea exports that remain in a
petrochemicals world made more regional by
plastic recycling and geopolitically driven
re-shoring.

Middle East players will also be able to tick
the lower carbon box. For example, the low cost
of carbon capture and storage (CCS) in Saudi
Arabia could give the Kingdom an edge in
exporting to Europe when the CBAM applies to
petrochemicals.

Perhaps the US will also be among the winners
in long-distance export markets. Perhaps not if
the industry’s costs for CCS place it at a
disadvantage – and if the US is on the wrong
side of trade barriers.

China may also be among the export winners if
its decarbonisation efforts combine with
continued big increases in local capacity.

Producers in Europe, Singapore, South Korea and
Japan are under pressure to consolidate, with
capacity shutdowns said to be under discussion.

This is because of feedstock cost
disadvantages, the age and scale of assets,
lower-than-expected China growth, the country’s
increasing petrochemicals self-sufficiency and
the costs of carbon abatement.

“National champions” could also win –
regional-only players without major deep-sea
export positions supported by governments for
local economic reasons.

Plastic recycling offers another route to
success for producers.

But producers need to work with waste
collection and sorting companies, and they must
cooperate closely with brand owners and
retailers on re-use and redesign.

They also need to manage the expectations and
perceptions of the other stakeholders – the
NGOs, the academics and the general public.

They need to ensure that governments provide
the right regulatory framework in countries
where policies are heavily shaped and re-shaped
by short-term politics.

But the opportunities are big, especially in
markets where volumes of demand and growth
prospects are low. I consider the example of
Australia.

Some producers argue that the viability of
recycling investments hinge on of brand owners
and retailers paying “green premiums” to cover
investment costs.

But because supermarket margins are typically
only 3-4%, neither the supermarkets nor their
customers have the capacity to pay premiums.

The way forward instead seems to be producers
working with the brand owners on sustainable
packaging solutions that enable brand owners to
win more market share

Editor’s note: This blog post is an opinion
piece. The views expressed are those of the
author, and do not necessarily represent those
of ICIS.