Dubai Future Economy Strategy - EngageDXB › docs › dubai_chemicals_and... · Dubai Future...

Dubai Future Economy StrategyDubai’s Chemicals and Petrochemical Industry, 2017 – Outlook and Trends



The chemical & petrochemical industry is the backbone of the manufacturing sector in the UAE as it serves a wide range of industry sectors

The chemical and petrochemical industry in the UAE is monitored by the UAE Ministry of Environment and Water.

The industry takes raw materials such as oil, natural gas, and inorganic minerals and converts them into chemical products.

The industry serves different sectors including infrastructure, agriculture, textiles, pharmaceuticals, packaging, automobiles, and power industry.

The Gulf Petrochemicals and Chemicals Association (GPCA) works for the development of the chemicals and petrochemicals industry in the GCC region and addresses the issues in the industry.

The GPCA also connects its member companies through various initiatives such as conferences, exhibitions and conventions to shape the future of the industry and have sustainable development.

Image Source: Frost & SullivanSource: GPCA; Frost & Sullivan


Production capacity in the UAE is the fastest growing in the GCC and is expected to witness growth in market share

• The GCCs Chemicals production capacity in 2015 was 144.6 Million tonnes.

• The GCCs Chemicals production capacity increased from 62.1 Million in 2005 to 144.6 Million in 2015 registering a CAGR of 9%.

• Basic Chemicals formed the major share of GCCs chemicals production capacity with 51 Million tonnes.

• The utilisation of GCCs chemical production capacity has been more than 90% since 2010.

19

519

26

14

26

8

15

10

21

2

3

2005 2015Inorganic Chemicals Mainstream FertilizersFertilizer Raw Material Chemicals & Inorganic ChemicalsIntermediaries PolymersBasic Chemicals

62.1 Million tonnes

144.6 Million tonnes

GCC Chemical production capacity

Source: GPCA; Frost & Sullivan


The structure of the Chemicals and Petrochemicals Industry in Dubai includes the following participants

Chemicals and Petrochemicals

Chemicals & Chemical

Products

Chemical Trading

Plastics Companies

Special Chemicals

Manufacturing

Petrochemical Products

Source: Frost & Sullivan


Chemicals and Chemical ProductsSizeable infrastructural investments across the Middle East is driving the growth of chemical manufacturers in the UAE

The UAE is the second largest exporter of chemical products in the GCC region and manufactured chemical products worth AED 45-50 Billion in 2016.

The petrochemical capacity of the UAE was 13.7 Million tonnes in 2016.

The construction chemicals market is expected to grow at a CAGR of 6% between 2016 and 2021.

There are infrastructural projects worth AED 1.8- 2 Trillion under development across the Middle East region.

The glass manufacturers in Dubai also enjoy growth due to the heavy investments by both public and private investors in infrastructure projects and demand from automotive and transportation industry.

A few major infrastructural projects in the region are EXPO 2020 in Dubai and 2022 FIFA World Cup in Qatar.

Image Source: Frost & SullivanSource: Government of Dubai Website; Frost & Sullivan


PlasticsThere is a growing demand for plastics across different sectors – going forward the UAE plastics industry must increase its production capacity

• The UAE is the second largest plastic producer and consumer in the GCC region and has a market share of 20%.

• The GCCs plastics industry had a production capacity of 27.1 Million tonnes and the revenue was AED 121 Billion in 2016.

• The GCCs plastics industry production level grew at 11.7% annually between 2005 and 2015.

• The plastics industry in the UAE had a production capacity of 5.3 Million tonnes in 2016.

• In 2016, Dubai imported plastics worth AED 18.42 Billion, while exports and re-export were worth AED 12.61 Billion.

• The fastest growing market in the GCCs plastics industry is the industrial packaging.

• The UAE’s plastic processing industry is growing at a rate of 5% annually.

• In 2016, the per capita plastic consumption in the GCC region was 94kg.

• The Fibreglass market and the plastic pipes market in the UAE are mainly driven by construction projects.

• The fibreglass market in the Middle East region is expected to grow at a CAGR of 5% between 2016 and 2021.

Image Source: Frost & SullivanSource: GPCA; Dubai Statistics Center; Frost & Sullivan


Special Chemicals (1/2)Agricultural production is a major concern around the world and the UAE’s fertilizer industry can cater to the global demand as it is well-supported by the logistics facilities…

• The special chemicals include performance chemicals and agro chemicals.

• The UAE is the third largest fertilizer producer in the GCC region with a production capacity of 5.5 Million tonnes in 2016, while the GCCs production capacity was 37.7 Million tonnes.

• The fertilizer industry in the UAE has grown by more than 50% between 2005 and 2015.

• The fertilizer industry in the UAE is an export-oriented industry and more than half of its production is exported to different parts of the world.

• In 2016, the share of urea in UAE’s fertilizer production was 80% .

• The GCCs ammonia production capacity was 13.2 Million tonnes in 2016.

Image Source: Frost & SullivanSource: GPCA; Frost & Sullivan


Special Chemicals (2/2)…and it is also increasing its production capacity for other special chemicals such as sulfur that is widely used in different manufacturing processes and thereby reduces the import dependency

• Sulphur is the world’s most widely used chemical and is used in the production of fertilizers, pesticides, pharmaceuticals, cosmetics and sulfurized rubber.

• In 2015, the UAE produced 2.5 Million tonnes of sulphur and is estimated to have produced approximately than 3 Million tonnes in 2016.

• The UAE is completely import dependent for caustic soda. A new manufacturing facility has been announced in Abu Dhabi, which is expected to reduce the import dependency. Nuberg Engineering is setting up the facility in Khalifa Industrial Zone.

Image Source: Frost & SullivanSource: Government of the UAE website; Frost & Sullivan


Chemical TradingIncreasing exports and declining imports in recent years highlight the growth of domestic production and growing presence of global chemical manufacturing giants in Dubai

• In 2016, the Emirate of Dubai imported chemical products worth AED 68.6 Billion while exporting and re-exporting chemical products worth AED 37.5 Billion.

• The import of chemical products has seen

a declining trend, the import value had decreased from AED 75.4 Billion in 2014 to AED 68.6 Billion.

• The increasing investment in the chemicals and petrochemicals manufacturing sector in Dubai is expected to increase the domestic production of chemical and petrochemical products.

• Petrochemicals forms the major share of GCCs chemical exports.

• JAFZA is the major free zone involved in the chemical and petrochemical operations in the Emirate of Dubai and is home to more than 7,000 companies of which 12% of them manufacture chemicals and petrochemical products.

Image Source: Frost & SullivanSource: Dubai Statistics Center; GPCA; JAFZA; Frost & Sullivan


Basic Chemicals has the largest share volume wise, but Polymers & Fertilizers are experiencing faster growth

• The petrochemicals has formed the major share in GCCs chemical exports.

• There has been increasing focus towards the polymer industry due to which the share of polymers has increased from 23% in 2005 to 30% in 2016.

• The share of the fertilizer industry in GCCs chemical exports has remained the same due to stagnant consumption.

• The contribution of specialty chemicals and other chemicals to GCCs chemical exports have been meager at 7% in 2016.

36%

30%

27%

3% 4%

Basic Chemicals,ChemicalsPolymers

Fertilizers

SpecialtyChemicalsOthers

GCC Chemical Exports Composition, 2016

Total Volume of GCC Chemicals Exports, 2016 – 70.5 Million tonnes

Source: GPCA; Frost & Sullivan


Petrochemical ProductsVehicular population in the GCC is on the rise – Currently, UAE is the largest lubricant producer in the Middle East and with innovations and advancements in technology it can firm up its position

• Petrochemical products are products derived from petroleum.

• The petrochemical capacity of the UAE was 13.7 Million tonnes in 2016.

• The UAE is the largest producer of lubricants in the Middle East region and a major share of its production is exported.

• The lubricant market in the UAE has been growing due to increasing vehicular population and infrastructural projects. The main products exported are gear oils and greases.

• In 2016, the Emirate of Dubai imported fuels and lubricants worth AED 26.9 Billion, while the exports and re-exports were worth AED 13.5 Billion.

• In the UAE, there are more than 20 blending plants and in the Emirate of Dubai the largest blending facility plant is in JAFZA.

Image Source: Frost & SullivanSource: Dubaï Statistics Center; Frost & Sullivan


Industry Drivers (1/2)The key drivers of the chemicals and petrochemicals industry in the UAE are EXPO 2020, 3D printing technology….

EXPO 2020• The EXPO 2020 is expected to bring in 25 Million visitors and

the Government of Dubai has planned several infrastructural projects ahead of the event

• The demand for construction materials such as cement, glass products, pipes, steel is expected to increase .

• It is also expected to increase the demand for F&B products and other consumer products, which use chemicals and petrochemicals to get the end-consumer product.

Fertilizer Demand• Food security is a growing concern for countries around the

world.• Fertilizers increase the agricultural yield by providing plants with

more nutrients, that caters to the deficiencies of the plant. • The agricultural production is greater in fertilizer using farms

compared to farms which do not use fertilizers and other modern technologies.

3D Printing• The world’s first 3D printed building built at an area of 250

square metres using construction chemicals and solutions has redefined architecture.

• The project cost was very low that there was almost 50% savings due to the time and labour costs saved.

• The Government of Dubai plans to have 25% 3D printed buildings in Dubai by 2030.

Image Source: Frost & Sullivan, Freepik.comSource: Dubaï Statistics Center; Frost & Sullivan


Industry Drivers (2/2)…population growth, auto & manufacturing sectors, which presents opportunities for rapid growth.

Increasing Population • The steady rise in the population level has increased the demand

for products across different sectors such as F&B, infrastructure, manufacturing, healthcare, automotive and transportation etc.

• These sectors use chemicals in their products to manufacture their end user products.

Construction projects• The different construction projects developed across the GCC

region such as EXPO 2020 site development, residential buildings, commercial complexes, Al Maktoum International Airport, Dubailand and FIFA World Cup 2022

Raw materials for Automotive Industry• There is demand in the automotive industry for value added products

such as elastomer, synthetic rubber tires and engineering plastics, which is expected to boost the UAE’s plastic industry.

Manufacturing sector demand• Chemicals and petrochemicals form the base for several other

manufacturing sectors and forms an integral part of every industry. • The Government of Dubai aims to increase the contribution of the

manufacturing sector to the GDP, which is expected to boost the chemicals and petrochemicals industry.

• In the F&B industry, chemical products are used for various purposes such as testing the food, increasing the efficiency of the production process and the food product etc.

Image Source: Frost & Sullivan, Freepik.comSource: EXPO 2020 ; GPCA; Frost & Sullivan


Industry RestraintsHowever, oil price volatility, lack of awareness & changing consumption patterns pose challenges

Oil price volatility • It leads to change in prices of basic chemicals as well as commodity

chemicals as there is a change in production costs, which is the main factor that decides the market prices.

• In 2016, the oil price volatility affected the growth in the GCC region and the SMEs in the chemicals industry faced the problem of late payments, which had a negative effect on the cash flow and ultimately affected the production levels.

Lack of Awareness Among Consumers • Consumers lack awareness about the quality of engine oils,

lubricants used in their vehicles, which has led to low demand for high quality oils.

Plastic Waste Management• In Dubai, 25% of the total solid waste collected in 2015 was plastic

waste. • Although, plastics have become an essential product in the modern

life, its disposal has become a major environmental issue.

Fertilizer Market• The challenge faced by the fertilizer market in the world is that there

is difference in the soil in different parts of the world. • The fertilizer companies cannot produce the same generic product

for all the regions and has to provide variable products specific to the soil type and other regional factors and will have to come up with innovative solutions.

• Another challenge is that there is a change in the fertilizer consumption pattern of farmers to reduce the environmental problems.

Image Source: Frost & Sullivan, Freepik.com, Pixabay.comSource: GPCA; Frost & Sullivan


While global oil prices will remain closely watched, value-added products are expected to see growth

• The outlook of the chemicals and petrochemicals industry in the UAE is expected to be positive in the future.

• The OPECs production cut decision has resulted in the recovery of crude oil prices and prevents over-supply of crude oil.

• There is growing focus towards value added products and a shift from commodity products in the chemicals and petrochemicals industry.

• Value added products such as synthetic rubber, engineering plastics, elastomer etc. have increasing demand due to their efficency and applications in the downstream industries such as F&B, healthcare, infrastructure and automotive etc.

• Overall, the chemicals and petrochemicals industry is poised to grow further with new innovations, and technologies such as 3D printing.

Image Source: Frost & SullivanSource: Frost & Sullivan


Glossary

Abbreviation Expansion

AED United Arab Emirates Dirham

CAGR Compound Annual Growth Rate

ESMA Emirates Authority of Standardization and Metrology

F&B Food and Beverage

FCA Federal Customs Authority

GCC Gulf Cooperation Council

GDP Gross Domestic Product

GPCA Gulf Petrochemicals and Chemicals Association

JAFZA Jebel Ali Free Zone Area

OPEC Organization of the Petroleum Exporting Countries

SME Small and Medium sized Enterprise

UAE United Arab Emirates


The Government has developed various strategic initiatives to support and promote the chemicals industry (1/2)

1. UAE Vision 2021

• It is a set of key themes showing the vision for socio-economic development of the country in the next decade.

• One of the theme is ‘Sustainable Environment and Infrastructure’ for which the Government plans to improve the quality of air, preserve natural resources, and use new innovative methods for waste treatment to become a Green economy.

2. Business Friendly Environment

• The Government supports the companies by providing world-class infrastructure, commercial incentives, and other facilities which enables manufacture and trade of chemical and petrochemical products.

• In JAFZA, almost 14% of the companies are into manufacturing chemical and petrochemical products.

• Leading chemical and petrochemical companies such as 3M, BASF and Dow Chemicals are located in JAFZA.

1

2

Image Source: Frost & Sullivan, freepik.com Source: GPCA; Frost & Sullivan


The Government has developed various strategic initiatives to support and promote the chemicals industry (2/2)

3. Dubai Industrial Strategy 2030

• The strategy is to develop Dubai as a global platform and destination choice for international companies thereby increasing the amount of manufactured exports.

• The Government aims to develop six industrial sectors to achieve the goals, of which the F&B and Pharmaceuticals sector are expected to give a boost to the chemicals and petrochemicals industry.

4. Green Customs Initiative

• The initiative aims to help the Federal and local Government bodies to counter illegal trade of goods that create harm to the environment.

• The FCA has made it compulsory for importers of chemicals and other related products to attach manuals along with the products which will include all the information related to the products such as directions of use, storage methods, and precautions.

3

4

Image Source: Frost & Sullivan, freepik.com Source: GPCA; Frost & Sullivan

Dubai Future Economy Strategy - EngageDXB › docs › dubai_chemicals_and... · Dubai Future...

Documents

Transcript of Dubai Future Economy Strategy - EngageDXB › docs › dubai_chemicals_and... · Dubai Future...