CHIMEA, the Petrochemical Powerhouse

GPCA has partnered with A.T. Kearney to study the future role of China, India, Middle East & Africa (CHIMEA) in the global Petrochemical landscape

Dubai, 22 November 2010 — The shores that border the Indian Ocean form one of the world’s most significant trading blocks. Encompassing the global growth engines of China and India, the wealth of the Middle East and the emerging potential of Africa, this region is called CHIMEA (China, India, Middle East and Africa). CHIMEA is not a new construct—the links between the member states are strong and history has wedded them through trade across the Indian Ocean. Their future potential economic power and importance for the petrochemical industry cannot be denied, according to A.T. Kearney, one of the world’s leading management consulting firms, who, together with the Gulf Petrochemicals and Chemicals Association (GPCA), just released their whitepaper on the subject.

The CHIMEA region is characterized by representing an increasing share of global population and wealth. The growth in economic power of CHIMEA has been coupled with a rapid development of the regional petrochemical industry, as consumption has increased across key petrochemical consumer industries. Buyers of petrochemicals such as the automotive, construction, textiles, food and food packaging industries are expanding rapidly.

“Regional demand for petrochemical products combined with strong state support for economic diversification, job creation, industrial independence, and oil and gas reserves has provided a platform for growth of the CHIMEA petrochemicals industry,” said Dan Starta, managing director, A.T. Kearney Middle East. “Over the past two decades, CHIMEA’s petrochemical industry, specifically in the Middle East and China, has dramatically altered the footprint and dynamics of the global market,” he continued.

The joint A.T. Kearney and GPCA report forecasts that, with the planned continued growth of ethylene capacity, the CHIMEA region will account for around 45 percent of worldwide ethylene capacity in 2020—almost double its 23 percent share in 2007. The same is true for polymers, where the region is expected to grow from 20 percent in 2007 to around 40 percent in 2020.

“The CHIMEA capacity expansion will exacerbate the pressure on petrochemical players in established markets outside the region. The financial crisis hit many of these players hard and although in the short term they may resist with increased regional demand, further reductions in capacity may be necessary to align to the dominance of the CHIMEA region in petrochemicals” commented Louis Besland, partner, A.T. Kearney Middle East.

This redistribution of demand and supply of petrochemicals is already altering global trade flows and will continue to do so over the next decade. A.T. Kearney expects the most dramatic changes to occur in Europe and the Middle East. Europe is likely to move from being a net exporter to become a net importer of petrochemicals, while the Middle East will become a dominant player on the export market. Exports out of the Middle East are forecast to grow by more than six times over the next five years.

“During the past decade the petrochemical industry has undergone tremendous change. Middle Eastern Petrochemical players need to consider the strategic alternatives to capture the full potential from this new global map of petrochemicals; new strategies and operational capabilities will have to be developed to face the probable capacity reductions in Europe, or the rise of the Indian and African markets,”  concluded Starta.

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