GLOBAL PLASTIC MARKETS

AND THEIR IMPACT ON THE CONVERSION

INDUSTRY IN THE GCC

ANDREW REYNOLDS, RESEARCH DIRECTOR

AMI CONSULTING

Contents

• Introduction

• How the world plastics industry has developed

• Where the GCC fits in the world

• Characteristics of the GCC

• Global Market trends

• GCC Market trends

• Conclusions

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IR194 – GPCA Conference

Introduction: about AMI

• Market Analysis: in-depth multi-

client reports Plastics Processing in the GCC (2012)

Global BOPP markets (2012)

Global Stretch Film Markets (2011)

• Single client services Feasibility studies

Technical and commercial due diligence

Strategic analysis/business development

Customised market research

• Digital magazines

Sector oriented (e.g. BOPP)

Free-to-reader (at www.amiplastics.com):

– Compounding World

– Injection World

– Film & Sheet Extrusion

– Pipe & Profile Extrusion

• Conferences and Seminars

Middle East Plastic Pipes, May 15-16, 2012,

Dubai

Flexible Packaging Middle East, November 13-

14 2012, Dubai

The Plastics Industry Strategy Seminar, 12

November, Dubai 2012

Middle East Plastic Processing Seminars (see

website for dates and venues)

• Database products Top 50 plastics processors in the GCC (2012)

Directory of plastic convertors in the GCC

(2012)

Directory of plastic convertors in Turkey (2010)

Databases of Europe, Asia and USA

2

The plastics industry in 2011

• Plastics processing is successfully established in every region and

country of the world

• The impact of plastics products and goods is felt in every economy and

society on the planet

• The average consumer relies on and uses numerous distinct plastics

products every day

• Plastics drive the global economy

– Building and infrastructure

– Communications

– Transport

– Packaging of all consumer goods (rigid and flexible)

– Leisure and social activities

3

Development of the processing industry

Local production

National and regional processors

Interregional processors

Global dimension

Pre 1970’s

1970’s-1980’s

1980’s- 1990’s

2000’s-2010

In same

time resin

producers exit

processing and

financial

groups

take larger

holdings

4

Factors affecting evolution

Technology

Initially driven by West

Development of Japanese

Flow to developing world

Development of global base

Economy

Post war reconstruction

Oil shock

Changing ownership

JIT/Lean production

Global brands

Business

Family owned

Private groups

Quoted companies

Private equity

Global financial market

5

Position of the GCC in the world

GCC2%

Rest of World98% The world market is

214 million tonnes

6

Position of the GCC in Middle East

Africa

The Middle East/Africa is 18 million tonnes

GCC21%

Rest of MEA79%

7

Per Capita vs. Population

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

-20.0 0.0 20.0 40.0 60.0 80.0 100.0

Per

cap

ita d

em

an

d (

kg

)

Population (millions)

Germany

Qatar

U.A.E.

Oman

Kuwait

Bahrain

Saudi Arabia

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Per Capita & Growth

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0

CA

GR

20

11

-20

16

Per capita demand (kg)

Germany

QatarU.A.E.

Oman

Kuwait

Bahrain

Saudi Arabia

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A favorable economic environment

• IMF forecasts GDP in the GCC in 2011 will be over 9% higher than 2009

• Improving growth prospects in each of the GCC countries

• Plastics conversion has the potential to grow significantly faster than GDP

• Global GDP growth was 4.4% in 2010 and is forecast at 4.5% in 2011

2010 2011 2012

Bahrain 4.0% 1.5% 3.6%

Kuwait 2.3% 5.7% 4.5%

Oman 4.1% 4.4% 3.6%

Qatar 16.0% 18.7% 6.0%

Saudi Arabia 3.4% 6.5% 3.6%

UAE 2.4% 3.3% 3.8%

10

Global polymer growth by region % p.a.

7.9%

10.2%

4.5%

7.8%

5.3%

2.7%

2.9%

GCC

Indian Sub Continent

Asia

Greater China

Latin America

NAFTA

Europe

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

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Dynamics of the GCC Market

• GCC has become the leading global trading source of polyolefin resins

• The GCC can increasingly offer a full range of all the major thermoplastics

• The producers in the region have an advantaged feedstock position ensuring competitivity

• Energy costs for plastics processing are highly competitive

• High net reserves and earnings mean capital for downstream processing is readily available

• Governments have the determination to ensure maximum value is added to raw materials

• A strong group of local entrepreneurs are driving the next stage of industrial development

• Investments increasingly have a global dimension

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Saudi Arabia55%

UAE25%

Qatar5%

Bahrain3%

Kuwait6%

Oman6%

Thermoplastics resin 3.8 million tonnes

Distribution of polymer demand in the

GCC

13

Investment by plastics convertors

• High levels of investment suggest confidence in market growth

• High levels of investment suggest capacity is not a limitation of

plastics processing output

• Investment is predominantly in the best equipment available

• 85% of investment is in the Saudi Arabia and the UAE

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Flexible Packaging Industrial

10%

Flexible Packaging Consumer

16%

Rigid Packaging Industrial

6%

Rigid Packaging Consumer

24%

Building23%

Agriculture2%

Automotive1%

Electrical Appliances1%

Medical0%

Housewares3%

Toys1%

Sport and Leisure1%

Furniture1% Others

11%

End use applications for polymers

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Market drivers

• Construction

Remarkably stable environment

High fertility rates/growing populations drive demand

Strong advances observed in cables, pipes, sheet and fibres

• Packaging

Consumer and industrial segments are both growing strongly

Rigid and Flexible items both growing

• Very high quality standards for local products

Export opportunities in:

• BOPP

• Stretch Film

• Strapping

• Industrial products also seeing strong growth

16

GCC has 1175 significant plastic processors

Injection Moulding38%

Blow Moulding12%

Rotational Moulding2%

Polyolefin Film23%

Pipe Extrusion4%

Profile Extrusion7%

Cable Producers2%

Sheet Extruders4%

Thermoplastic Compounders

3%Other Processors

5%

Distribution of polymer processors

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Plastics convertors in the GCC

• 1,175 significant primary convertors

50 largest account for 50% of conversion

Largest convertors operate across several sectors

Film extruders: 265

Injection moulders: 450

Blow Moulders: 135

Pipe and Profile extruders: 150

• Most investments are made to very high (international)

standards

• Export opportunities are significant

18

Who is the weak link in the chain?

Raw Material supplier Final customer Plastics Processor

19

Observations – Market overview

• The period 2007-2011 marks a period of significant change in the world plastics industry, the leading geographical epicenters of the industry are increasingly China, India and the GCC

– China is the largest market for polymers and continues to expand rapidly

– India is quickly joining China as a world force

– The GCC is emerging as a leading source of polymer supply

• The traditional centers of demand in Europe and NAFTA are recognizably mature in most areas although they continue to dominate technology and much processing innovation.

• Although it is questionable that a “global industry” exists the shape of the world industry is increasingly formed by global brands and their international operations

• The activities of major brands and end users in a global economy are changing relations at all stages of the value chain causing a refocusing of business strategy and driving a refined corporate structure

20

Concluding remarks on the world industry

• While the plastics industry has come a long way and continues to grow the greatest challenges it faces are managing the complexity that derives from a global market.

• Management in the plastics industry increasingly have to deal with “uncertainty” in their markets and develop a path that ensures profitability and survival. Among these challenges are:

– Short term demand fluctuations

– Raw material availability

– Unstable price patters

– A rapidly changing political landscape

– Evolving customer intentions

– An unclear trade dynamic (including logistics)

• The successful companies will be those who keep a strong focus on the long term opportunities and customer needs while managing the short term instability increasingly apparent in an interrelated world economy

21

What drives plastics innovation

Innovation

What’s Needed?

Consumer Competition Stakeholders

What’s Possible?

Technology Chemistry Materials Processes Business Model Supply Chain

22

Conclusions

• Oil and derivate wealth drives the local economy

• The population of the whole region is 40 million, of whom 28 million are resident in KSA.

• Wealth is highly concentrated which helps define local end use demand for plastics.

• Wide slate of available resins drives the

opportunity

• Plastics processing is geographically

concentrated. The major centres are

Jeddah, Riyadh and Damman/Al Khobar in

Saudi Arabia and Dubai/Sharjah in the UAE

which between them account for

• 60%+ of all plastics processed

• 70% of the fifty largest processors

• Clusters of plastic processing are appearing

around resin producers in other parts of the

region e.g. in Oman, Qatar, and Abu Dhabi.

0

0

100

100

200 Kilometers

200 Miles

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So how do you make money?

The preconditions for success are:

• Defensible business plans

• Robust product propositions

• Clearly defined markets, and channels to provide access to market

• Good execution of the business plan

Capable management team

• Suitable resources (equipment, feedstock, money, people)

Equipment, feedstock & money are in principal all available, the availability of suitably

trained people can be more difficult

• World class understanding at every level

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Thank you

Andrew Reynolds, Research Director

AMI Consulting Applied Market Information Ltd.

45-47 Stokes Croft

Bristol, BS1 3QP, UK

Tel: +44 (0)117 9249442

Fax: +44 (0)117 9892128

Email: consult@amiplastics.com

Applied Market Information LLC

1210 Broadcasting Road, Suite 103

Wyomissing, PA 19610, USA

Tel: +1 (610) 478 0800

Fax: +1 (610) 478 0900 Email: consult@amiplastics-na.com www.amiplastics.com

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