Petrochemical industry deals with the development/manufacturing of various products extracted from feedstock, i.e. petroleum or natural gas. These petroleum products unknowing to a majority of the global population play a significant role in our day-to-day lives. The petrochemical industry provides raw source materials for the production of gasoline, agricultural products, homecare goods, textiles, asphalt and almost all of the plastic variants.
The current usage of petrochemicals is being dominated by the production of plastics, because of the end-use product’s uses in buildings, automotive, packaging, consumer goods. The main problem with petrochemical industry currently is the alarming decline in the availability of feedstock for the production of these end-use products. The availability of feedstock sources has been dominated by North America and Middle East & Africa since the last half century.
This trend of declining raw materials availability is set to significantly increase the prices of products derived from petrochemicals which might invoke a surplus of products in the industry. This surplus is set to be met with declined demand and major users undertaking alternative products such as inhibiting the use of plastics, utilizing electrical energy sources for powering up the vehicles instead of utilizing internal combustion engines. The majority of demand for petrochemicals and their products are from these two end users.
This declining trend is expected to invoke a decline in the transformations currently planned by the major manufacturers of petrochemical products as they will be cutting their costs and halting/delaying their plans for capacity expansion. This is because of the fact that the petrochemicals industry is highly competitive and the rising prices of petrochemicals have given rise to a need of reducing the costs of the products they produce by the manufacturers, this pricing mechanism has induced a significant decline in the profitability ratio of the manufacturers.
Although the major players in the petrochemical industry are focusing on finding different solutions as well as advancing the technology so that they can utilize the alternate solutions of feedstocks instead of consuming the already declining levels of petroleum. The major concerns for the market are that the manufacturers with an abundant supply of raw materials have not transformed this advantage into providing the output that they can provide. Comparatively, for the amount of raw materials supply that they have, they have not been able to transform this advantage in terms of real output value.
Conclusion
The market is currently displaying a growth trend although the signs of a collapse have been witnessed with declining profit margin for the products produced by the petrochemical industry. This lack of profitability has been backed by the slower growth of the industry as compared to the last decade wherein they witnessed a significant surge. This surge was witnessed due to the manufacturers having an advantageous situation of establishing their industries close to the feedstock origin, which provided them with the capability of having highly competitive production costs and large profit margins. This advantage is slowly declining, and a new trend is overtaking the market with the scales of raw material prices similar for all the manufacturers. These manufacturers need to focus on the aforementioned challenges to their market to sustain their survival.
