Market Trends of Saudi Arabia Chemical Logistics Industry
The Rise in Chemical Production is Expected to Propel the Growth of the Chemical Logistics Market
The region's larger chemical companies benefit in general from competitively low feedstock prices, which are priced at significant discounts to the European benchmark, the Dutch TTF, which briefly exceeded USD 70 per million British thermal units (mmbtu) in mid-August 2022, compared to USD 25/mmbtu at the beginning of June 2022 and USD 18/mmbtu at the end of 2021. Saudi Arabia, for example, kept methane and ethane prices stable at USD 1.25 and USD 1.75/mmbtu, respectively. When combined with a strong consumer and shareholder base, the GCC players' profitability outperforms their European counterparts.
Higher commodity prices (particularly natural gas) benefit commodity players in the GCC. This is shown in their comparatively excellent performance in 2021 and their rather resilient first-half performance in 2022. Overall market expectations are for publicly traded chemical companies to maintain healthy unadjusted EBITDA margins of around 30% in 2022, compared to 34%-35% in 2021, despite some margin softening this year due to global capacity additions outpacing demand in some segments and high inventory levels.
Furthermore, national oil companies are investing in the development of gas fields to increase gas production, which aids in the provision of raw materials for electricity and petrochemical production. In particular, Saudi Aramco announced in March 2022, as part of its long-term strategy, that it is considering potentially increasing gas production by 50% by 2030 and is investing to increase gas production for electricity and petrochemical production by developing gas fields unrelated to oil production.
Rising Demand from Various End-User Industries
Despite global financial difficulties influencing the building industry, Saudi Arabia's construction industry remains a leader in the Middle Eastern area. In Saudi Arabia, construction production growth is predicted to be around 3.5% in 2022. Construction chemicals are usually used to increase the speed of work in construction projects that are in the planning stages or to give strength and stability to new projects. Bulk chemicals are critical components for constructing complex structures and have completely revolutionized the construction sector.
Government projects such as King Salman Park, Neom City, Red Sea Project, Jabal, and other infrastructure projects are increasing the demand for products made from petrochemical or bulk chemicals such as adhesives, tiles, and others, thereby supporting the growth of Saudi Arabia's bulk chemical market.
Butyric acid, along with acetic acid and propionic acid, is one of the three most prevalent short-chain fatty acids (SCFAs) in the stomach. Around 90–95% of the SCFAs in the gut, which are created when gut-friendly bacteria break down dietary fiber, are made up of these saturated fatty acids. Butyric acid is used to give buttery overtones to food tastes, and its esters are frequently used as food additives to boost fruit aroma.
Butyric acid is widely known for its anticancer qualities since it stimulates morphological and biochemical differentiation in several cells while concurrently reducing neoplastic tendencies. According to Arab News, the pharmaceutical business in the Kingdom is expected to export more than SR 1.5 million per year and grow at a pace of 5% per year, with more than 40 recognized pharmaceutical enterprises in Saudi Arabia supplying 36% of the country's medical needs. As a result, demand for butyric acid is expected to rise in Saudi Arabia, driving market development.
In December 2022, Saudi Basic Chemical Industries (SABIC) announced the opening of a new unit, the Saudi Industrial Chemicals factory situated in Jeddah. This new factory helps SABIC in producing dioctyl terephthalate from ethyl hexanol.
