Shift Towards Biological Hydrocarbons and Shale Gas as Key Feedstock Opens New Opportunities in Petrochemicals Production

The global petrochemicals market is highly fragmented with no clear leader, says Transparency Market Research (TMR) in a new study. The top three players accounted for 20% of the market in 2013. A trend of large companies acquiring smaller, regional companies can be observed in the industry, states TMR. Another common trait among companies is the shifting of the manufacturing base to the emerging countries in Asia and the Middle East and Africa. Some of the leading players in this market include Shell, Sinopec, BASF SE, Mitsubishi Chemical, ExxonMobil, SABIC, and The Dow Chemical Company.

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Since the market is capital intensive, new players have to overcome high entry barriers. The procurement of raw materials at reasonable prices also becomes a major concern. Additionally, stringent environmental regulations by government authorities will make it difficult for new players to penetrate in the market. Thus, the threat of new entrants is expected to be low in the coming years.

Petrochemicals are required in the construction, automotive, chemicals, textiles, and packaging industry. High production capacities of these end use industries in China and India are resulting in a heightened demand for petrochemicals in these countries. Some of the key applications of petrochemicals in the construction industry are adhesives, resins, fibers, concrete, plastics, and repair. These applications are driving the growth of the petrochemicals market in China. Governments of various countries in Asia Pacific are introducing policies and initiatives that promote the growth of the petrochemicals market in the region.

Petrochemicals are also extensively used in automotive plastics as they increase the strength, flexibility, and durability of these materials. Petrochemicals such as benzene and polyethylene are used extensively in food packaging and preservation, pharmaceuticals, and transportation sectors. Since the Middle East is one of the key producers of crude oil, the abundant availability of raw materials in the region is driving the low cost production of petrochemicals products.

Environmental hazards and the price volatility associated with the use of synthetic-based petrochemicals are acting as major restraints for the market. In order to reduce dependability on petrochemicals, companies are focusing on the development of bio-based chemicals. Carbon dioxide emissions have increased owing to rapid industrialization in emerging nations. The International Energy Agency (IEA) has recommended all nations to cut down on their fossil-fuel subsidies and instead adopt energy efficient production methods. All these factors are expected to pose a threat to the growth of the petrochemicals market.

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Although naphtha and natural gas have been key feedstocks for the petrochemicals market, of late there has been a shift towards biological hydrocarbons, coal and unconventional natural gas such as shale gas. This trend is especially growing in China and the U.S. Since China is the key producer of coal as well as petrochemicals, the coal-based petrochemicals market is expected to see a heightened growth in the coming years. Other countries are also increasing their focus on shale gas to avoid relying on natural resources such as crude oil and natural gas. Thus, a shift towards feedstocks such as coal and shale gas is emerging as a new opportunity in the market.

According to TMR, the global market opportunity in petrochemicals is expected to rise from US$635.93 bn in 2015 to US$885.07 bn by 2020. On the basis of product, the ethylene segment is expected to lead and account for 26.5% of the market by 2020. China led in the past and is expected to maintain its domination in the long term. China is expected to account for 29.1% of the global petrochemicals market by 2020, followed by the Rest of Asia.

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