Petrochemical and Downstream Industry: What is Driving the Demand?
The trends in the petrochemical and downstream industry have been erratic. The industry has always been the center of attention, being broken down into upstream, midstream, and downstream. The rising demand in the downstream sector, which includes products aimed at end users, is the reason for this. Even though the market is projected to expand at a CAGR of more than 5% over the next 8–10 years, volatility still exists. Changing oil prices, shifts in supply and demand, or problems with the value chain can all be to blame for this.
The majority of the sector’s growth has come from developing countries in APAC. The demand for a variety of well-liked and average products has been growing as a result of increased demand from countries like India, Thailand, and Vietnam. Other regions with potential growth over the next ten years include the well-established regions of North America and Europe.
The downstream is easily hampered by these gradual but sure shifts and changes across the entire petrochemical industry spectrum.
How has COVID-19 Contributed to the Big Impact?
The pandemic resulted in significant changes in the petrochemical sector. Due to their strong correlation and interdependence, the decline in both production and demand was evident. Many nations reduced their output, and some facilities completely shunned the plant. In both developed and developing nations, the number of these shutdowns has been high.
Global production has decreased by 1.5% overall, with Chile experiencing the largest decline of more than 20%. On the other hand, nations like Germany, Belgium, and the UK are experiencing positive growth rates ranging from 1 to 4 percent. With over 2,000 billion US dollars in chemical sales in 2020, Asia-Pacific led all other regions except for Europe, North America, Latin America, Africa, and the Middle East.
Oil and gas was undoubtedly the sector with the greatest performance decline, followed by the automotive, paints and coatings, and construction industries. A difficult period has been experienced by key players, particularly in the second quarter of 2020. Key players such as Ashland’s earnings have increased by 6% over the past year, while Celanese has seen significant one-year earnings declines (-45%).
During the COVID-19 pandemic, plastics that are now prohibited in some countries were highly sought-after items. The transition to a circular economy is already under way, but it will take years to complete. This illustrates how the demand for products derived from the petrochemical industry can be slowed down but not entirely eliminated in the near term.
Demand Trends and Changes in Downstream Industry
The focus shift towards customer experience and on-demand service delivery is largely responsible for the petrochemical industry’s rapid evolution. Sustainability is undoubtedly altering how the industry was perceived and will appear in the years to come. For the benefit of all parties, new formulations and regulatory updates will be made by the nations. Some industries, such as those producing chemicals, won’t allow the demand for petrochemicals to fall off, though.
There is no denying that as the end market changes, the need to suggest completely new value chains and applications will resurface. This can be attributed to the global pandemic, political unrest, demand for alternative fuels, advancements in technology, etc.
Circular economy, feedstock, trade, and other crucial factors, among others, have the potential to fundamentally alter the petrochemical industry over the next ten years.
As the demand and usage for products with a chemical focus rose in the past few years, many nations and regions are developing and diversifying their product lines. Product lines are being added, and the portfolio is expanding. Countries are taking additional measures to address this increased demand, with China’s cheap, abundant coal playing a key role in bringing down production costs to increase profits. Reverse integration has occasionally been used to better adapt to dynamic changes. One such instance is the Hengil Group in China, which established a refinery focused on petrochemicals and also acquired shares in the oil fields of Abu Dhabi. There have been some excellent announcements and plans to diversify and broaden the Middle East’s programs. In order to build the largest refining and petrochemical facility in the world by 2025, the Abu Dhabi National Oil Corporation (ADNOC) of the United Arab Emirates has announced a USD-45 billion downstream investment plan.
Strategic portfolio expansion is necessary to maintain sustainability and keep up with emerging trends. Market research and end-user requirement assessments are required for this. The downstream industry’s demand is constantly changing, and using expansion strategies and keeping these hints in mind can help businesses survive in the present scenario.