How to boost Saudi plastics exports...

Updated 03 August 2015
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How to boost Saudi plastics exports...

While Middle Eastern and African countries enter into one crisis after another, none of which ever nearing an end, the Gulf Cooperation Council countries, led by Saudi Arabia, offer a successful example of sustained stability and prosperity.
The government of Saudi Arabia has always had the prescience of capitalizing on the natural vocation of the country by incentivizing the petrochemical industry.
Major strides were accomplished, namely the launching of the five national clusters program of which four are specifically targeted at growing the manufacturing of plastic end products:

— The Plastics And Packaging Cluster.
— The Pharmaceutical and Biotech Cluster.
— The Automotive Cluster.
— The Solar Panel Cluster (solar panels are laminated with ethyl-vinyl-acetate (EVA) sheets).

The once abundant associated natural gas of Saudi Arabia was offered at a tiny fraction of its market value, particularly as compared to what it would cost in gas dry Europe and the Far East.
The beneficiaries of this nearly zero cost incentive in ethane supply are joint venture partnerships grouping foreign firms with advanced technological knowhow, to local entities.
The understanding which still holds is that if one million British Thermal Units (BTU) is availed at 75 cents to petrochemical complexes in Saudi Arabia (around fifty million BTU’s of ethane make up one metric ton of polymers), the petrochemical joint ventures  would commit to prioritize the Saudi converting sector in their sales strategies, which would contribute to the growth of the Saudi converting sector and lead to the concretization of the national clusters program.
Furthermore, areas were designated within government sponsored petrochemical complexes to serve as industrial parks fully integrated to polymer and monomer feedstock supplies to attract greenfield plastic converting projects from within Saudi Arabia and the rest of the world, particularly from countries where the cost of energy and primary raw material is prohibitively high.
Petrochemical companies agreed to the bargain of availing raw material they produced to tenants in the industrial parks alongside  their facilities, in exchange for the advantaged ethane feedstock received from the government.
We must remember that one million BTU of natural gas costs around $10 landed at an LNG port terminal in Europe and almost twice that much if imported by a Far Eastern party.
Today, with no more unallocated natural gas to offer to new petrochemical projects, the Saudi government is reportedly re-evaluating its strategy of giving away its precious little ethane in the light of some figures on plastic primary raw material exports which indicate that 87 percent of polymers and nearly 100 percent of monomers produced are exported outside the Middle East, while barely 10 percent of polymers is sold locally to Saudi based converters.
The immediate measures facing the Saudi government to boost exports and favor employment opportunities might include:

— Placing export ceilings on polymers and monomers beyond which tariffs will apply.
— Raising the invoiced cost of BTU’s to petrochemical companies.

Options on price controls through benchmarking are likely to be less successful since some petrochemical news vectors prefer to be respectful of the interests of their paying clients.
It is also fathomable that at some point the Saudi government might decide to shift more decidedly the bargaining power in raw material purchasing to converters by weakening the historical oligopolistic stronghold one major petrochemical company, in which the Saudi government is majority owner, has wielded for the past four decades, and is likely to maintain for years to come.
This petrochemical behemoth, which enjoys the lowest energy costs in the world as part of a deal to nurture the domestic plastic industry of Saudi Arabia, is reported by most converters in the Kingdom as being inflexible in dealing with them on such key issues as final price levels and availability of needed products.
Frequently, Saudi-based converters have even accused their captor supplier of offering lower prices in major markets such as China, India and Europe than in Saudi Arabia.
Such claims by converters earn credibility when their influential supplier is prosecuted abroad on dumping charges, that is selling in foreign markets at lower prices than at home.
Such practices have had a destructive effect on the growth of Saudi-based converters, that was compounded by the protectionist tariff measures, several countries in Europe have resorted to in order to revive their own plastic manufacturing industries.
Concrete steps to disassemble and weaken the oligopolistic yoke of this petrochemical giant would be to separate its manufacturing units into separate and independent companies, competing with one another to the benefit of converters; rather than subduing them with a near monopoliztic state of supply captivity. 
For Saudi Arabia to boost its exports of finished plastic products, Saudi converters have to compete with global counterparts who are not at the mercy of a handful of captor suppliers and enjoy direct access to specialty grades unavailable in our region that can only be imported at a cost that prohibits the profitable export of the finished product.
Such specialty grades constitute a major portion of the cost structure, albeit a minor percentage of the tonnage and the key properties in the end product depend on them. 
We must be aware that the low price of crude oil, which is the main feedstock to European and Far Eastern petrochemical manufacturers, has breathed new life into petrochemical raw material suppliers. They could now very well expand in capacity and avail to their home based converters more abundant raw materials at lower prices.
Unless the local petrochemical community, spearheaded by the Saudi government takes immediate bold steps to strengthen and reinvigorate the purchasing power of Saudi-based converters, the local converting sector will soon face insurmountable competition from end products made throughout the world and exported profitably to Saudi Arabia. 


Apple’s Cook to China: keep opening for sake of global economy

Updated 23 March 2019
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Apple’s Cook to China: keep opening for sake of global economy

  • Cook’s comments come as Apple weathers sinking sales in China
  • Despite official pledges and repeated assurances that China would continue to open its markets

BEIJING: Apple chief executive Tim Cook nudged China on Saturday to open up and said the future would depend on global collaboration, as the United States and China remained locked in a bitter trade dispute.
“We encourage China to continue to open up, we see that as essential, not only for China to reach its full potential, but for the global economy to thrive,” Cook said at a China Development Forum in Beijing.
Despite official pledges and repeated assurances that China would continue to open its markets, some analysts worry that its reform project has slowed or even stalled under President Xi Jinping, who has sought greater control over the economy and a bigger role for state-owned firms at the expense of the private sector.
Cook’s comments come as Apple weathers sinking sales in China because of a contracting smartphone market, increasing pressure from Chinese rivals, and slowing upgrade cycles. The company reported a revenue drop of 26 percent in the greater China region during the quarter ending in December.
Before those results came out, in a January letter to investors, Cook blamed the company’s poor China performance on trade tension between the United States and China, suggesting that pressure on the economy was hurting sales in China.