Among countries that are part of the Gulf Cooperation Council (GCC) the chemical industry is the second largest manufacturing industry, after refining, when measured by value added.
Chemical industry currently accounts for 3.1% of the GCC's GDP1, which places it among the top nations in the world. It is also one of the largest global producers of basic chemicals.2 Indeed, the chemical industry is one of the fastest growing industries in the GCC, with revenue growing 17% in 2017, the biggest single year increase since 2011.3
With continued volatility in oil prices and the benefits from cheap feedstocks declining, GCC chemical producers have had to explore new strategies and opportunities. As a result, they are transitioning towards higher margin value added specialty chemicals. The middle class in China continues to expand,4 and GCC chemical companies are well-placed geographically to take advantage of the Asia Pacific markets. The growth in emerging markets globally, and the concurrent expansion of middle-class buying power, will also drive demand for specialty chemicals.5
Another opportunity for growth exists in fertilizer exports. With production expected to reach 44.8 million tons by 2025, fertilizer will remain a key element in GCC chemical production, particularly with the increased focus globally on ensuring food security and developing innovations in regional agriculture.6
In order to stay competitive in these emerging global markets, GCC chemical producers will need to embrace digitalization. The chemical industry globally is in a nascent stage when it comes to assessing how digitalization can drive significant business benefit, but companies are investing heavily in exploring ideas and change is likely to come rapidly. Digitalization offers chemical producers an opportunity to fundamentally improve the way they do business.
The chemical industry globally, has been built on the principals of free trade and given the integrated nature of global supply chains, relies on the ability to move products freely across borders. Many global chemical companies have been concerned by the recent rise in protectionism around the world and the more entrenched these issues become, the bigger the impact on the chemical industry is likely to be.
The automotive industry is speeding toward a new era marked by electric-powered vehicles, autonomous vehicles and shared mobility. Even as global sales tick downward,7 individual vehicles will be used more intensively, spending less time parked and more time on the road, transporting people and goods in a growing number of ways. For chemical companies supplying the automotive sector, the new mobility will mean a dramatic shift in product portfolios, clients, end users and business models to address an industry ecosystem that's becoming larger, more dynamic and far more interconnected.
The growing adoption of electric, autonomous and shared vehicles will affect the number, type and amount of chemicals required by automotive OEMs. Electric vehicles will remain a strategic market for plastics and other lightweight materials. In the face of these changes, GCC chemical companies may have to rethink their business models, reconsider key markets and recalculate the value propositions for every product in their portfolio. In the 26th edition of REACTION Magazine, we take a deep dive into Mobility 2030 and how changing demand patterns in the automotive industry are likely to drive fundamental change into the chemicals supply chain over the coming years.
One of the defining characteristics of the chemical industry is its dynamic nature. With all the changes above, there are abundant opportunities for GCC chemical producers to find new ways to be successful in the coming years - if they can adapt quickly enough.
7REACTION Chemical Magazine - June 2018 (PDF 2.9 MB)