Shaping the GCC plastic conversion industry’s landscape
Over the last few decades, the polymer industry in the GCC has grown at a healthy rate as the region benefited tremendously from growing demand in overseas markets. GCC producers primarily export their polymers to Asia, followed by Western Europe and Africa. Since 2010, regional production capacity has risen at a 3.6% CAGR to 28.2 million tons in 2020. Polymers represent 18% of total chemical capacity in the region, and as a result have a significant impact on the growth of the entire chemical industry in the GCC.
Polymer supply is fueled by increasing demand in various markets and end-user applications, which include packaging, construction, consumer goods and automotive. The plastic conversion industry in the Arabian Gulf is gaining momentum as the region strives to diversify downstream in the hydrocarbon value chain. With most plastic converters being small to medium-sized businesses, the market for plastic conversion is fragmented. There are an estimated 1,800 plastic converters, but only a handful can be considered large-scale businesses, and, in 2019, less than 15% of the GCC polymer product supply was consumed within the region by converters.
Figure 1: GCC polymer supply to local plastic conversion industry by polymer type and end-user sector, 2019 (metric tons)
Source: GPCA polymer producer questionnaire
Note: GPCA member companies only, Qatar and Bahrain are not included
Saudi Arabia is the largest regional polymer producer, with most of the production exported out of the region. In addition, it is the largest local polymer supplier to converters. The Kingdom has increased its product portfolio over the years, producing about 30 products – the highest in the region. The UAE is the second largest polymer producer and the second largest local polymer supplier. Local polymer consumption of polyethylene (largely HDPE, LDPE, LLDPE and other grades in smaller quantities) comprises the largest consumption block, representing about 50% of total polymer output supplied locally. Specifically, HDPE is the most widely consumed locally of the three major PE polymer types as seen in Figure 1.
PE regional demand is mainly driven by packaging applications, which is the largest end-user segment globally, and the largest end-user segment regionally. The textile industry is the second largest end-user industry in the region, driving demand for polyethylene terephthalate (PET), also commonly known as polyester because of its excellent tensile and impact strength, clarity, processability, chemical resistance, and thermal stability. Construction is the second largest industry globally, and the third largest regionally, in terms of polymer consumption. One of the most important polymers for the construction industry is polyvinyl chloride (PVC), which is used for windows and door frames and underground pipes, due to its stiffness and durability. The consumer goods industry is also an emerging market for various polymer consumptions, including polyethylene. This is driven by easy access to ethylene and the regional industry’s tilt toward light weight molecular hydrocarbons.
Figure 2: Enablers of the GCC polymer conversion industry development
Source: GPCA analysis, 2020
Challenges in plastic conversion
Every GCC economy faces various domestic challenges, but which ones are the most troublesome for the plastic conversion industry? Some of the key challenges in developing the regional plastic conversion industry include a limited and fragmented end-user market, low manufacturing attractiveness, and a fast-changing regulatory landscape driven by environmental considerations. The pressure to develop the plastic conversion industry is reaching a breaking point to meet the aspirations of future generations, capture value from product exports, stimulate the development of downstream industries, and eventually lead to more sustainable economic growth. Several enablers are emerging that create unique opportunities for the downstream industries as illustrated in Figure 2. There is a strong alignment between a need to act and the ability to act.
Plastic conversion and the circular economy
The plastics industry plays a crucial role in supporting sustainability and the circular economy concept in various sectors. This means that plastics should never become waste reducing regional dependence on scarce natural resources and achieving alignment with the GCC national visions of sustainable long-term growth. With a focus on circular economy, up to 95% of plastics material value can be saved along its lifecycle. The drive towards a circular economy accelerated rapidly in 2020, with many companies in the region already starting to adopt circular business models and innovation strategies to ensure the production of more sustainable materials and that manufacturers have access to them.
While challenges to make the circular economy a reality in the GCC region hinder its progress, opportunities to adopt it, make it even more promising. As part of the shift to a more circular business model, the industry would need to enhance the sustainability of products and applications throughout their lifecycle. To make the circular economy a reality, the industry would need to establish a multi-stakeholder approach to plastic waste reduction and management through collaboration, innovation, regulations, and consumer education. Further integrating the GCC petrochemical and chemical value chains to create and economically sustain a market for recycled materials is also a part of the vision to achieve a circular economy.
Insights within his article have been derived from a recent GPCA report entitled ‘The Plastic Conversion Opportunity in the GCC: Moulding A Sustainable Future’. The report provides full details of the statistical profile of the GCC polymers and plastics conversion industry, as well as the strategies, obstacles, and opportunities in the adoption of a circular economy.