Looking ahead

Mohamed Al-Mady, vice chairman and chief executive officer, Saudi Basic Industries Corporation (SABIC), and chairman of the Gulf Petrochemicals and Chemicals Association reveals his hopes and predictions for the year ahead.
Looking ahead
By Mohamed Al-Mady
Tue 13 Jan 2009 04:00 AM

Today our industry is being buffeted by many external factors. More than anytime that I can recall our industry is being challenged on many fronts.

I might mention a few such as global economic slowdown, deleveraging of a global financial system, looming new product supplies, feedstock concerns, global warming issues, shortages of skilled workers, high cost of construction and global credit issues.

I would like now to make a few comments on the short history of this Forum. The GPCA Forum has experienced an excellent reception in its three years of existence - growing from 450 participants in 2006 to over 850 in 2007. This year we have more than 900 participants and I thank you all for your support.

I believe much of the success of this Forum is credited to the line-up of outstanding speakers that have been assembled each year - and this year is no exception. Our speakers come from around the globe with outstanding leadership credentials. And I might add, the Middle East has become an area of increasing significance in the global chemical industry.

Although the GPCA is young, significant progress has been achieved for the benefit of our member companies. Starting with only eight member companies in 2006, our association has grown to include 138 member companies today with representation from global, regional, small and large companies. Interest in GPCA membership continues to be robust.

The Association places great value on information sharing and transparency and compliance. GPCA had two member working committees: one for human resources and one for safety, health and the environment.

Most recently, two additional working committees have been formed, one for plastics and another for supply chain. These committees hold workshops, seminars, educational programs and regional surveys for the benefit of our member companies. GPCA believes these committees, manned by talented member company employees, and GPCA staff provides invaluable support for our industry and our members.

In addition, GPCA is in dialogue and information exchange with other prominent industry associations such as EPCA, ACC, CEFIC, NPRA, APLA and APIC. Our industry has much to gain as regional associations work cooperatively for the benefit of the global chemical industry.

In 2007, GPCA laid the foundation for "Responsible Care" and we expect to have a working committee for "Responsible Care" in 2009 as this program expands throughout the region.

Earlier, I mentioned that our industry is facing strong challenges. The US and the Eurozone are apparently now in recession. Two of the largest consuming regions are in financial distress.

The current financial crisis started in the U.S. with issuance of sub-prime home mortgages and the subsequent repackaging of these mortgages into high risk and complex derivative products. These derivative products were traded around the world by highly leveraged investment banks. When the housing bubble burst in the U.S. these products become known as toxic products.

The contagion spread from the U.S. to other parts of the world precipitating a severe disruption to global credit markets leading to the subsequent intervention of the Federal Reserve in the U.S. and central banks in Europe. Financial institutions are now in the process of deleveraging and rebuilding their balance sheets.

Simultaneously, global stock markets around the world were rattled and most lost 50% or more of their value - none were spared. The idea that some countries can be immune to the crisis in the global financial and trading system has lost all credibility. Stock markets tend to look forward - not backward.

Stock markets are signaling that global economic growth will be slowing with some major regions in the West moving into economic recession.

Emerging economies, such as China and India, which have been experiencing strong GDP growth are expected to have continued growth but at a lower level.

Chinese Premier, Wen Jiabao, recently said that "the direct impact of the crisis on China has been relatively light but the accompanying slowdown in the world economy and export demand would inevitably have an impact on China's economy."

The credit crisis in Wall Street has global implications as international banks become more "risk averse". Projects, even in this region, may be exposed to more stringent lending practices and higher interest rates on loans.

Market research analysts point to large and new capacities of petrochemical products coming on stream in the coming years. This will be occurring at the time when global growth will be slowing, creating a difficult and challenging environment for our industry.

Finally, climate change has arrived as a major agenda item for our industry which depends heavily upon hydrocarbons for its basic feedstocks.The world community is arriving at a decision that global warming is indeed a very important issue for our environment and that human activities are contributing to this problem. This is a serious issue which will clearly have a substantial impact on our industry and must be followed closely, although the scope of this impact is not yet clearly defined.

In the past, periods of difficulty for our industry have led to bursts of innovation in processes and products. Clearly research and development activities will be an important element in leading to the evolution of a stronger industry when emergence from this difficult period arrives down the road. Mohamed Al-Mady, vice chairman and chief executive officer, Saudi Basic Industries Corporation (SABIC), and chairman of the Gulf Petrochemicals and Chemicals Association.

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