Israel Petrochemicals Report Q4 2009

Israel Petrochemicals Report Q4 2009

The Israeli chemicals industry is suffering generally from the effects of the global economic downturn
with both depressed exports and a sharp contraction in the domestic market, but BMI’s latest Israel
Petrochemicals Report predicts a fast recovery with domestic petrochemicals demand likely to be led by
construction. In Q109, chemical exports fell 21% y-o-y to US$2.68bn, with exports of petrochemicals and
plastic raw materials down 40% y-o-y to US$115.3bn. Domestic demand is faring little better with the
economy in recession and consumer spending falling hard and fast amid rising unemployment. BMI
forecasts a 1.9% contraction of GDP in 2009, followed by 2.4% growth in 2010 and 2.6% in 2011.
More importantly for end-users of petrochemicals, household spending growth is likely to remain
negative in 2009 and sluggish in 2010, as unemployment remains relatively high. However, there are
some signs that consumer confidence could be starting to bottom out, or at least stabilise, suggesting a
pick-up in private consumption growth rates later in the year. For 2009 as a whole, household spending
will decline around 2.0%. The industrial sector will mirror the consumer spending slump.
Another positive trend can be observed in the building sector, which is a major petrochemicals consuming
industry. Recent data reveals an ongoing contraction in the supply of housing in Israel, and with the
volume of house sales starting to pick up; we highlight the possibility that the current spurt in house
prices could be maintained, particularly as credit conditions improve. Over the medium term, however,
increased bank lending will benefit property developers, boosting supply growth and thus moderating the
rate of house price inflation. This should help lift the price and boost demand of certain petrochemical
products on the Israeli market, such as PVC. While domestic petrochemical producers will benefit from
the recovery, feedstock availability constraints will limit the growth in potential capacity expansion. The
recent commission of Carmel Olefin’s (COL) new PP facilities has raised the company’s PP production
capacity from 200,000tpa to 450,000tpa. It has also expanded the production capacity of its monomers
plant and other ancillary facilities. The new plant aims at alleviating PP shortage in Israel and
significantly boosts the country’s polyolefins capacity.
The Israeli petrochemicals sector is likely to remain focused on domestic sales and is not expected to rival
other markets in the region. This is primarily due to the country’s lack of upstream activity. While Gulf
States have developed petrochemicals industries on the back of their domestic gas and oil production,
Israel’s gas and oil production are negligible. If recent offshore gas discoveries are confirmed, there may
later be some scope to develop the petrochemical industry further. BMI forecasts that ethylene production
will rise from 200,000tpa in 2006 to reach 450,000tpa by 2013, due to COL’s expansion programme. PP
capacity should remain at 450,000tpa beyond the forecast period on current indications, while PE
capacity is not forecast to change from current levels of 165,000tpa. However, BMI expects new
investment plans following the privatisation of ORL, with a likely expansion over the forecast period.

Executive Summary .5
SWOT Analysis6
Israel Petrochemicals Industry SWOT.. 6
Israel Political SWOT.. 7
Israel Economics SWOT . 7
Israel Business Environment SWOT .. 8
Global Market Overview..9
Global Ethylene Capacities .. 9
Table: World Ethylene Production By Country, 2008 And 2013 (‘000 tonnes capacity) 9
Polypropylene 12
Global Oil Products Market Review 15
Table Global Oil Prices, 2003-2013 (US$ per barrel). 19
Market Overview..20
Market Structure.. 22
Table: Israel Petrochemical Sector – Cracker Capacity, 2005-2013.. 22
Plastics And Rubber Sales .. 23
Petrochemicals Business Environment Rankings .24
Table: Middle East And Africa Petrochemicals Business Environment Ratings . 24
Limits Of Potential Returns. 24
Risks To Realisation Of Returns 25
Industry Trends And Developments ..27
Projects And Acquisitions 27
Company Developments 28
Upstream Developments .. 30
Industry Forecast Scenario .33
Table: Israel’s Petrochemicals Sector, 2006-2013 34
Macroeconomic Outlook.. 35
Table: Israel – Economic Activity, 2006-2013. 37
Company Monitor38
Carmel Olefins (COL ) . 38
Gadiv Petrochemicals Industries .. 39
Dor Chemicals.. 40
Israel Chemicals Ltd (ICL) . 41
Israel Petrochemical Enterprises (IPE) . 43
Country Snapshot: Israel Demographic Data45
Section 1: Population. 45
Table: Demographic Indicators, 2005-2030. 45
Table: Rural/Urban Breakdown, 2005-2030 46
Section 2: Education And Healthcare. 46
Table: Education, 2002-2005 . 46
Table: Vital Statistics, 2005-2030. 46
Section 3: Labour Market And Spending Power . 47
Table: Employment Indicators, 2001-2006 47
Table: Consumer Expenditure, 2000-2012 (US$) .. 48
Table: Average Annual Wages, 2000-2012 48
BMI Methodology 49
How We Generate Our Industry Forecasts 49
Chemicals And Petrochemicals Industry .. 49
Cross Checks 50
Business Environment Ratings 51
Table: Petrochemicals Business Environment Indicators And Rationale 51
Weighting 52
Table: Weighting Of Indicators . 52