Future of chemicals II: Middle East challenges

Published: July 7, 2010

Executive summary

As the current economic crisis reshapes chemical industry dynamics, nowhere will the transformation be more evident in the next three to five years than in the rise of Middle East chemical companies and their impact on established players in western Europe and North America.

As they have been doing recently, chemical companies based in the Middle East will continue to focus on producing basic chemicals and polymers primarily to leverage their regional feedstock advantage in oil and gas and to gain from the growing need for these products in nearby Asian markets. However, as gas and oil prices rise and as the drive to create more jobs and add more value in Middle East industries escalates, these companies will likely move downstream into performance and specialty segments. Until now, challenging portfolio dynamics, complex supply chains, and somewhat unwieldy manufacturing and sales requirements have made specialty chemicals a difficult option for less established companies. But the ongoing commoditization of specialty chemicals and the advent of new business models will change this situation.

Clearly, Middle East companies will present a significant challenge for Western chemical businesses in the near and long terms and will no doubt be pivotal in forging a new outlook for the global chemical industry. In this second in a series of Perspectives about the future of the chemical industry, we discuss how established chemical companies can more than hold their own among these new realities by comprehending well the nature of this fresh competitive landscape and taking a series of steps to minimize its impact.

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Future of chemicals II: Middle East challenges