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Israel Petrochemicals Report Q1 2010
Market |
Energy and Utilities |
Report Type |
Market Research |
Country |
Israel |
Published |
16 November 2009 |
Number of Pages |
54 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Israel’s petrochemicals industry is unlikely to experience a growth in capacity over the medium-term, but is well-placed to experience a strong recovery in sales in 2010, according to BMI’s latest Israel Petrochemicals Report.
In 2009, Israel’s petrochemicals industry included capacities of 450,000 tonnes per annum (tpa) 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 report does not envisage any substantial increase in capacities over the next five years, with no plans for new petrochemicals plants over the medium-term.
Israel is undergoing an economic recovery following a contraction in GDP of 3.2% in Q109, with improving exports and a strengthening currency demonstrating that the country is set to make a fairly quick recovery from what has been, by global standards, a fairly short recession. Petrochemicals producers did not experience the surge in exports seen in other industrial sectors, with export growth led largely by sales of high-tech goods. However, household spending is arguably more important to the Israeli petrochemicals industry’s recovery, accounting as it does for around 55% of real GDP. Research has shown that consumer confidence is growing and spending is rising. At the same time, imports have been depressed, giving Israeli industry an upper hand and improving its prospects going into 2010.
However, a rapid appreciation of the shekel could undermine the competitiveness of local petrochemicals producers.
Another positive trend can be observed in the construction sector, which is a major petrochemicals consuming industry. Recent data reveals an ongoing contraction in the supply of housing in Israel, and with the volume of house sales starting to pick up we highlight the possibility that the current spurt in house prices could be maintained, particularly as credit conditions improve. Over the medium term, however, increased bank lending will benefit property developers, boosting supply growth and thus moderating the rate of house price inflation. This should help lift prices of certain petrochemicals products on the Israeli market, such as PVC, and boost demand.
While domestic petrochemicals producers will benefit from the recovery, feedstock availability constraints will limit the growth in potential capacity expansion. Israel currently has a weak reserves position, but recent offshore gas strikes suggest that reserves can be expected to grow.
In the Middle Eastern Petrochemicals Business Environment Rankings matrix, Israel lies in sixth place with a score of 54.8 points. It has fallen one place since the previous quarter due to a surge in Kuwait’s position in the rankings, linked to the Gulf state’s growth in petrochemicals capacities. With no planned significant growth in petrochemicals capacities over the medium-term, Israel’s score is unlikely to change much over the next five years, although it could be improved by better political, economic and business risk ratings. Compared to competitors’ scores, Israel is 1.0 point behind Iran – the region’s second largest petrochemicals producer after Saudi Arabia – and 1.5 points ahead of South Africa.
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