China's Chemical Industry – An opportunity for the Middle East?
by Markus Köpsel
China’s chemical industry has grown fast and is still a major growth contributor to the global chemical industry. China’s new chemical market has contributed to half of the world’s chemical market growth in the last decades. The growth which slowed down due to the country’s GDP growth deceleration is still on a higher level and the progression of absolute volume is still tremendous. In percentages this means the growth shrank from >20% in 2006 to >5% in 2017.
Projections still suggest that the chemical market in China will contribute to half of the global market growth. The potential is certainly huge looking at a 5% growth of China’s market running at the same absolute value as the total industry size of Spain or Brazil. (McKinsey “China’s chemical industry: New strategies for a new era”)
China’s largest chemical company ranks 3rd on the Top 50 Global Chemical companies with chemical sales of $55.3B in 2017. Also, under the top50 is a Chinese company with sales growth rates >75%. (Chemical & Engineering News 2018)
The potential of the chemical market and industry in China and the Middle East and North Africa region (MENA) looks like a big opportunity and might become a factor in the recent investment deals between the UAE and China as well. MENA investment in the energy sector is estimated to be $1 trillion over the next five years. Total investments in the gas sector will amount to $186 billion, just under half of which is committed investments, while in the petrochemical sector investments will continue to rise, with total investments marking over $123 billion, which includes $33 billion for projects currently under execution. (Gulf News, April 2019)
Eventually, the chemical industry could be the next focus between these countries to enhance trade as well as supply chain solutions. Companies plan to focus on the European and African market will enable the UAE and especially Jebel Ali as a chemical and petrochemical hub for these flows. The UAE chemical industry’s contribution was the highest among all GCC states, accounting for 52% of manufacturing revenue. Off the back of significant investments over the past decade, the UAE almost doubled its share in overall regional capacity from 4.7% in 2006 to 8.5% in 2016 (Gulf Petrochemicals and Chemicals Association -GPCA- press release 27 November 2017, GCC chemical industry to sustain region's non-oil economic growth).
The infrastructure in terms of providing best solutions and options for the industry’s supply chains is partly developed and undergoing the next steps. Getting ready to also handle the more hazardous / dangerous products in terms of refilling, transferring and even blending in future will enable the UAE to be a complete solution provider in supply chain optimization projects for these companies and the industry. The geographical position of the UAE as being close to the growing Middle East markets as well as a strong transit point into the growing markets in Africa is also a strong factor for consideration (re-)designing the supply chain flows.
The recent infrastructure developments raised the standards in terms of health, safety, security, environment and quality (HSSEQ). New facilities and procedures have been developed and implemented in order to enable global compliance as per highest industry standards. The service and solution portfolio developments are undergoing further enhancement this year and beyond. The next step will be to set new standards in terms of transportation of chemicals including control measurements (e.g. along ADR) to raise the HSSEQ level to the same as the level of the infrastructure which has been started to be lifted-up in the last years.
Ultimately the direction drives to create a fully integrated hub for the chemical and petrochemical industry for transit or final mile distribution into the surrounding countries with strong future outlooks of regional development projects (e.g. EXPO 2020 Dubai, Saudi Arabia’s Strategy 2030, etc.).
The timing is right to set the bases for the next phase of development and growth of the future in Asia, Middle East and Africa which are the booming markets in the coming years.
Looking at this I believe it is a great opportunity for collaboration and solution creation that will add value and optimization for sustainable supply chain flows and the total ecosystem when it comes to health, safety, security, environment and quality in line with setting, raising and maintaining standards that delight all of us living in these regions.
This long-term approach with sustainability focus will lead to happy businesses and happy people living a safe and exciting environment.