Increased trade circulation pattern

This year, the supply of chemicals in the Middle East has been mixed. Some products are in tight supply, while others will have new production capacity.

With the resumption of relations between the Gulf Cooperation Council member states headed by Saudi Arabia and Qatar, the petrochemical industry in the region will be improved, and more companies are expected to join in the future.

PE and PP processors in Saudi Arabia can now supply products to the Qatar market. Therefore, they are full of hope to improve resin utilization. This historic event has brought optimism to the processing industry in Saudi Arabia.

Asia can also expect the Gulf Cooperation Council countries to provide better and more stable supply after reaching an agreement.

The member countries of the Gulf Cooperation Council are typical countries that export polyolefins to Asia (especially the Chinese market).

ICIS market analyst Lorenzo Meazza said that Qatar is the fourth largest PE producer in the region. In 2019, its PE production exceeded 2 million tons and its export orientation is very strong.

Meazza said: "In the region we are talking about, the major countries are also important PE producers. They benefit from a considerable surplus balance and their output far exceeds consumption."

He added that this means that the improvement in relations between Qatar and Saudi Arabia may have a small impact on intra-regional trade flows, because the volume of trade is inherently small.

"However, both countries may benefit from improved cooperation in the region. In addition, since the new PE project will be put into production this year, Oman will soon become an exporting country. The conclusion of the agreement may improve logistics in the region. , Which is conducive to the flow of trade from the Middle East to the rest of the world."

At the beginning of the new year, Middle East base oil supply may remain tight in the first quarter, and the current market fundamentals have not changed much.

The supply of Class I base oils has been tight because the main producers in the region are headquartered in Iran and have been struggling with multiple challenges, including the impact of the new crown epidemic, sanctions on Iranian shipping companies, and political factors that may continue to plague them. Distressed export sector.

As most of the virus-related restrictions in the Middle East have been relaxed, demand has improved. However, due to the downturn in the spot market at the time, some producers either reduced production during the shutdown period or handed over most of their goods to futures buyers, so the supply of first-class oil was difficult to keep up.

Iran is a major first-class base oil producer in the Middle East. There are currently four refineries actively producing base oils, which are mainly used in the engine lubricant industry.

In the last quarter of 2020, Iran’s base oil supply to the UAE, the region’s main trading center, slowed down, and the supply was reduced to less than half of the monthly demand in the UAE market.

The UAE is the main trade and reconciliation center for base oils and the main point of entry for goods before they are re-exported to other destinations in the Middle East and Africa.

According to Iranian sources, due to the impact of the new crown epidemic on the production speed of refineries, coupled with the increased demand for domestic use of reconciliation, the number available for export has decreased.

The PVC spot market in the Middle East and South Asia will continue to face supply shortages this year, because some factories are still in a state of shutdown, while others plan to shut down for maintenance in the first quarter.

Because domestic production cannot meet consumer demand, the Middle East and South Asia are heavily dependent on imports, especially India, the world's largest importer of PVC resin.

With the launch of China's new production capacity, it is expected that the supply of TDI goods in the Middle East will improve, thereby reducing the demand for hoarding goods that buyers expected due to supply shortages caused by unplanned factory shutdowns.

It is expected that the supply of polyol goods will also improve in 2021, because Asia and Europe will add new production capacity.

As polyols are used together with TDI as auxiliary raw materials for PU foam production, the availability of polyols may further help stabilize the TDI demand pattern.

At the same time, PMDI demand is expected to have a different trajectory in 2021. The new crown epidemic has exacerbated the long-term slowdown in the construction industry in the Middle East, which is the main consumer market for most PMDI goods in the market.

Although the supply of PMDI is expected to improve in 2021, the underlying weak demand means that overall market activity may stagnate.

In 2020, under the influence of the epidemic and uncertain factors, PET buyers in the Middle East will become more dependent on regional supply. This trend may continue in 2021, especially Saudi Arabia will add new production capacity.

Previously, Pan-Asia Saudi Co., Ltd. had a conceptual plan of a 1 million tons/year plant in Saudi Arabia, which was scheduled to be put into operation in 2021, but its development and construction status has not yet been confirmed.

If the Saudi plant is put into production, it will have a major impact on the market balance in the Middle East, because it means that the supply in the Middle East will increase by 43%.

Middle Eastern buyers who rely more on regional supplies may further reduce imports from Asia.

This year, the PS market in the Middle East and South Asia will continue to face a situation of bearish demand and tight supply.

The demand for PS in the Middle East is mainly focused on packaging and construction-related applications. Both GPPS and HIPS are used in the manufacture of food packaging and small-scale plastics, such as lunch boxes, trays and containers. GPPS is also used to manufacture insulating panels used in the construction industry.

However, in recent years, the demand in the packaging industry has gradually decreased, and buyers are increasingly replacing HIPS with PP or PET because of their lower prices and fewer environmental-related disadvantages.

The new crown epidemic has exacerbated the long-term problems facing the construction industry in the region. As many projects have been shelved due to the depletion of investment, market participants expect that the situation will not improve much in 2021, and this development will further limit PS demand.

At the same time, on the supply side, many buyers are unable to purchase the required inventory due to lack of supply.

The violent growth in Chinese demand has worsened the situation, which has greatly restricted the amount of goods exported from Asia to the Middle East, causing buyers to have to rely on regional producers.