Multiple market disruptions are shifting the balance of power among major regional players and reshaping the Middle Eastern petrochemical industry, a study by the Boston Consulting Group reveals.
A number of factors, including the shale gas renaissance in the United States, plummeting oil prices worldwide, and a capacity expansion drive in China and Iran, are putting Middle Eastern producers at risk of losing the competitive edge they long enjoyed from cheap feedstock, the study added.
By enhancing the commercial, operational, and innovation excellence, industry players can take vital steps toward safeguarding their bottom line, according to the BCG study entitled “Why the Middle East’s petrochemical industry needs to reinvent itself.”
“What needs to be done is often clear. Often strategies in the Middle East don’t work out not because of lack of vision but because companies don’t pay sufficient attention to capability building,” says Mirko Rubeis, partner and MD at the Boston Consulting Group Middle East.
“How to develop capabilities needs to be an integral part of the strategy, with a clear plan and attention not to stretch the organization in too many new domains. The issue today is that these new capabilities have become essential to maintain competitiveness — not anymore a ‘nice to have’ for Middle Eastern petrochemical players. And since capabilities building takes time, companies in the region should embark on their transformation journeys now,” Rubeis added.
Historically, GCC producers have relied on off-takers and traders to carry and sell their products in core markets and as a result have lost anywhere from 3 percent to 5 percent of their product value to middlemen.
Middle Eastern producers must strengthen their sales and marketing capabilities, including pricing sophistication, in addition to their supply chain management capabilities.
Producers must invest more into market analysis and customer segmentation and deepen their understanding of their customers’ value chain and identify critical applications for their products.
Commercial excellence has become even more important as petrochemical producers in the region expand downstream the value chain.
Embarking on an operational excellence program to enhance energy efficiency, effective raw materials usage and asset utilization while optimizing costs could improve petrochemical producers’ bottom line by more than 10 percent.
In addition, players can also benefit from close integration with refining and other chemical plants to achieve operational synergies.
Jubail and Yanbu, petrochemical industry hubs in Saudi Arabia, are cases in point.
A number of factors, including the shale gas renaissance in the United States, plummeting oil prices worldwide, and a capacity expansion drive in China and Iran, are putting Middle Eastern producers at risk of losing the competitive edge they long enjoyed from cheap feedstock, the study added.
By enhancing the commercial, operational, and innovation excellence, industry players can take vital steps toward safeguarding their bottom line, according to the BCG study entitled “Why the Middle East’s petrochemical industry needs to reinvent itself.”
“What needs to be done is often clear. Often strategies in the Middle East don’t work out not because of lack of vision but because companies don’t pay sufficient attention to capability building,” says Mirko Rubeis, partner and MD at the Boston Consulting Group Middle East.
“How to develop capabilities needs to be an integral part of the strategy, with a clear plan and attention not to stretch the organization in too many new domains. The issue today is that these new capabilities have become essential to maintain competitiveness — not anymore a ‘nice to have’ for Middle Eastern petrochemical players. And since capabilities building takes time, companies in the region should embark on their transformation journeys now,” Rubeis added.
Historically, GCC producers have relied on off-takers and traders to carry and sell their products in core markets and as a result have lost anywhere from 3 percent to 5 percent of their product value to middlemen.
Middle Eastern producers must strengthen their sales and marketing capabilities, including pricing sophistication, in addition to their supply chain management capabilities.
Producers must invest more into market analysis and customer segmentation and deepen their understanding of their customers’ value chain and identify critical applications for their products.
Commercial excellence has become even more important as petrochemical producers in the region expand downstream the value chain.
Embarking on an operational excellence program to enhance energy efficiency, effective raw materials usage and asset utilization while optimizing costs could improve petrochemical producers’ bottom line by more than 10 percent.
In addition, players can also benefit from close integration with refining and other chemical plants to achieve operational synergies.
Jubail and Yanbu, petrochemical industry hubs in Saudi Arabia, are cases in point.
