Israel Petrochemicals Report Q2 2012

Israel’s domestic chemicals and plastics market will not be immune to the slowdown in the global economy in 2012, according to BMI’s latest Israel petrochemicals report.

Israel's slowing growth is taking place against the background of debt crises in Europe and volatility in the financial markets, the fear of a major slowdown in global growth, and continuing geopolitical instability in the Middle East. The economy is set to decelerate further going forward, as we now project private consumption and exports to expand at an even slower pace than before, putting downward pressure on the chemicals and petrochemicals industries, particularly the fertiliser segment, which relies on exports.

Of most concern to the Israel petrochemicals industry is the downturn in industrial growth, which will be sustained throughout the next few years. Industrial growth will fall from 7.0% in 2011 to 5.4% in 2012 and 3.5-5.0% in subsequent years. This will limit domestic petrochemicals consumption growth in downstream industries, although the shekel’s weakness should undermine the competitiveness of petrochemicals imports on the local market.

In 2011, Israel’s petrochemicals industry included capacities of 450,000tpa ethylene, 345,000tpa propylene, 125,000tpa benzene, 230,000tpa xylenes, 165,000tpa PE, 450,000tpa PP, 160,000tpa PVC and 60,000tpa of methanol. The commissioning of COL’s new PP facilities has raised the company’s PP production capacity from 200,000tpa to 450,000tpa. It has also expanded the production capacity of its monomers plant and other ancillary facilities. The new plant aims at alleviating PP shortage in Israel and significantly boosts the country’s polyolefins capacity. BMI does not envisage any substantial increase in capacities over the next few years, with no plans for new petrochemicals plants over the medium-term.

However, BMI expects new investment plans following the privatisation of ORL, with a likely expansion over the forecast period.

In BMI’s Middle East and Africa petrochemicals business environment rankings matrix, Israel lies in fifth place, with a score of 56.8 points. The country lies 3.7 points behind Qatar and 0.4 points ahead of Iran. With no planned significant growth in petrochemicals capacities over the medium-term, Israel’s score is unlikely to change much to the end of our forecast period, although it could be improved by better political, economic and business risk ratings.