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Focus on five key factors can create and add value for petrochemcials plastics sector, says senior Shell chemicals executive

06/12/2004

Five factors - growth, feedstocks, size, portfolio and innovation - are key to creating value for petrochemicals and plastics businesses, Shell chemicals executive Arie Hoogenboom told delegates at a recent conference in Antwerp.

Mr. Hoogenboom, who is strategy and project manager for lower olefins, recognised that the profitability of petrochemicals and plastics producers has been squeezed by rising feedstock costs and the purchasing power of big manufacturing customers, retailers and distributors. But he also suggested that even in a fiercely competitive market place, it is still possible to create and add value throughout the supply chain. "What we need to ask is how and where we can create more value, because doing so is an essential component of a healthy, sustainable business for the materials the petrochemical industry produces."

Projected global chemicals sales growth from the mid-1990s through to 2010, offers a bright outlook, said Mr. Hoogenboom. "Chemicals sales could grow some 60%, from $1.5 trillion to $2.4 trillion. Global ethylene demand is growing much faster than demand for oil and gas and ahead of average GDP growth. Absolute growth is still significant in the maturing markets of the world - in Europe and North America. But in relative terms, the growth in Asia - and particularly in China - is staggering."

To create value from these growth opportunities, lower olefins producers are focusing on production economies of scale, feedstock advantages and cost. However, some of the global energy groups, which have traditionally also been big players in the petrochemicals and polyolefins sectors, are also restructuring their portfolios towards the upstream part of the supply chain. "There is no one-size-fits-all approach, but it is likely that this restructuring process will continue," he said.

Based on the lower olefins experience, Mr. Hoogenboom suggested plastics producers and converters could focus on these factors and innovate to add and create value while increasing the sustainability of their businesses. "The big challenges are to achieve higher value per tonne of product, exploit opportunities for further material substitution, and open up new markets by developing new and unique properties of polyolefins and other plastics."

Concluding, Mr.Hoogenboom offered delegates a little ‘food for thought’: "I like to think of value creation and growth as similar to adding yeast to a bread recipe.  If you get the mixture just right, your loaf will rise in the oven and come out nice and deep.  Get it wrong and you’ll be left with a flat slab. The challenge is to decide what sort of bread you want and then focus on making it rise."