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IHS WPC: Global chemical trade to boom on advantaged feedstocks: Witte

10:36 AM MDT | March 22, 2013 | Clay Boswell

Growth in demand for basic chemicals and plastics will continue to center in developing economies, but growth in supply will more and more be located elsewhere, increasing global trade, said Dave Witte, IHS senior v.p. and general manager of IHS Chemical. Witte made his remarks in a state of the industry address delivered at IHS Chemical’s 2013 World Petrochemicals Conference, at Houston, on Wednesday.

“The BRICs [Brazil, Russia, India, and China] account for about half the world's population, and while consumption in general remains low compared to the developed economies, especially finished goods, IHS forecasts that per capita demand will grow … such that in 2020, this very large population will be close to consuming at world average,” Witte said.

BRIC nations are already responsible for about 50% of global demand for basic chemicals and plastics, and IHS Chemical projects that by 2020, the share will be nearly 60%, Witte said. A portion of this demand is reexported to the developed world, but it will shrink as an increasing portion is consumed domestically by a growing middle class. Indeed, IHS Chemical expects these nations to offshore manufacturing, particularly to regions where unconventional resources have reenergized the chemical supply base.

“Tomorrow's global market is more interconnected,” Witte said. “The rise of unconventional resources continues to drive new investment and production away from the fast-growing demand centers, whether it's the frontiers of western China or even western Appalachia. Growth in new supply will be increasingly dislocated from the point of consumption.”

Global trade in basic chemicals and plastics will accordingly boom. IHS Chemical projects that by 2025, the volume will approach 250 million m.t., triple the volume of 2000 and nearly double that of 2010. For some value chains, notably those closely aligned with natural gas, one-third to one-half of global production will be traded.

“And this only represents materials that move between countries. Clearly the larger portion will move within regions as logistics works to connect feedstock-driven supply with customer-driven demand,” Witte said. “The implication is that it becomes even more imperative for companies to manage the risk of market access, the costs associated with product movements, and the development of effective go-to-market strategies and the risk mitigation that needs to come along with it.”

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