Petrochemical prices across the region are expected to remain high throughout 2011, supported by firming international crude oil prices which have hovered well above $100 (Dh367) a barrel, the latest research by Global Investment House shows.
"Based on our regional coverage, the sector's net profitability is expected to show quarter-on-quarter [QoQ] growth of 7.2 per cent in the second quarter of 2011, which will translate into year-on-year (YoY) expected growth of 55.5 per cent," the GCC Petrochemical Quarterly Report stated.
"We believe the expected higher average prices will continue to contribute a significant role in expected quarterly growth. Consequently, the primary impact of [an] estimated QoQ gain [in] prices [in the second quarter of 2011] will reflect directly on the sector's sales revenue, which is expected show QoQ and YoY growth of 8.7 per cent and 29.1 per cent, respectively."
Unrest a key factor
The persisting unrest in the Middle East and North Africa (Mena) region during the first quarter remained a key factor that saw the average prices of all benchmark crude oil hover above $90 a barrel, it added.
Global Investment House said it believes the additional production from Saudi Arabia could ease fears of a potential supply glitch across international markets due to the ongoing Libyan crisis. Dalton Garis, Associate Professor of Economics and Petroleum Market Behaviour at Abu Dhabi's Petroleum Institute, told Gulf News that petrochemical products were needed for pesticides, herbicides and anhydrous ammonia.
"The demand for these products is linked to food production, which is rising. As well, petrochemicals are used to make plastics and in packaging," he said.
"Demand for petrochemicals is bound to rise on increasing food production, and increasing global demand for plastics."
The regional petrochemicals sector's financial performance in the first quarter was outstanding.
Profitability, based on our regional petrochemical coverage, was recorded at $3.1 billion during the period, the report said.