New Market Research Report: Israel Petrochemicals Report Q2 2016


New Energy market report from Business Monitor International: "Israel Petrochemicals Report Q2 2016"


[USPRwire, Mon Feb 15 2016] Although Israeli petrochemical prices declined in 2015, margins improved as a result of falling naphtha costs even as sales stagnated. Israel's refinery sector has capitalised on imports of oil from Kurdistan as well as lower global oil prices, which has been fed through the production chain. With economic growth set to pick up in 2016, the outlook for the country's petrochemicals market is brightening, although capacity constraints will limit volumes.

Despite 1.7% manufacturing growth and improving economic performance, the petrochemicals industry witnessed lacklustre growth in 2015. In 10M15, plastic and rubber output declined 0.7% y-o-y, compared to 0.8% growth in 2014. Meanwhile chemicals declined 0.1%. In 9M15, Israel's main petrochemicals producer, Bazan Group, reported that aromatics output was down 4.7% to 365,000 tonnes, but polymers production grew 1.5% to 481,000 tonnes, indicating that the industry's performance varied across market segments.

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Naphtha costs will be crucial over the medium term to defending and growing petrochemicals margins. The theoretical surplus between supply and demand in the global oil market will grow over the coming years, precipitating a decline in the price of oil and a corresponding decline in naphtha feedstock costs. For Israel's relatively small, naphtha-fed petrochemicals industry, this will be crucial to ongoing profitability. However, at issue are the sector's ageing plants, which are under investigation for environmental crimes with calls for closure due to the effects of operations on residents. The efficiency of the plants brings into question their long-term competitiveness. While BMI does not envisage an imminent closure, long-term stagnation is likely.

Israel's petrochemicals capacities are likely to remain unchanged over the next five years with 450,000 tonnes per annum (tpa) ethylene, 345,000tpa propylene, 125,000tpa benzene, 230,000tpa xylenes, 165,000tpa polyethylene (PE), 450,000tpa polypropylene (PP), 160,000tpa polyvinyl chloride (PVC) and 60,000tpa of methanol.

We forecast the Israeli economy to grow by 3.4% in 2016 compared to our estimate of 2.1% in 2015, but below the 4.2% average recorded between 2004 and 2014. Rising security threats will present the main challenge to industry growth.

In BMI's Middle East and Africa Petrochemicals Risk/Reward Index matrix, Israel remains in sixth place, but its score has risen 0.9 points to 57.2 points this quarter as the country's economy will expand faster than most of its developed peers, in line with the past decade's trend. It retains the Middle East's best country risk score. Israel lies 1.5 points behind Kuwait and 5.7 points ahead of South Africa in the regional petrochemicals matrix. In spite of this improvement, it is unlikely that Israel will see movement in its ranking in the foreseeable future

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