Join Muhamad Fadhil, VP of Global Business Development at Argus Media as he sits down with the senior management of Middle East polymer and chemical distributor Rakha Al Khaleej (RAI)
In this episode, Muhamed Fadhil together with RAI's Mr Arul Dhasan, Senior Vice President – Polymer Business and Mr Tareq Al Naqeeb, Senior Vice President, Business Development discuss key drivers in the polymer markets for 2022 and sustainability.
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- Argus Global Polyethylene
- Argus Global Polypropylene
Muhamad: Hello everyone, and welcome to Global Polymers Conversation. "Global Polymer Conversations" is brought to you by Argus Media, a leading independent provider of energy and commodity pricing information. My name is Muhamad Fadhil, and I'm the vice president of global business development at Argus. I am honored to be joined by two industry guests from RAI, a global polymer distribution and chemical trading company, Mr. Arul Dhasan, senior vice-president, polymer business, and Mr. Tareq Al Naqeeb, senior vice-president, business development. Hello, Mr. Arul, and hello, Mr. Tareq. Thank you for joining me today.
Mr. Arul: Thank you for having me!
Mr. Tareq: Thank you, Fadhil.
Muhamad: Happy 2022 wishes to you and family, Mr. Arul. We've known each other for many, many years, and I'm glad we are finally doing a podcast together. As a starting point, can you share with our audience more about RAI and Polydist?
Mr. Arul: Thank you, Fadhil. Happy new year to you, and all your listeners. I wish you all a healthy and prosperous 2022. Rakha Al-Khaleej International, RAI was established in Dubai 32 years ago as a polymer and chemical distributor. Today our group of companies which include Polydist, our global polymer brand, has the support of key strategic suppliers, and is recognized by the market as one of the most reliable and relevant players in the GCC, Middle East, and the Indian subcontinent region. Along the years, the company has also expanded its reach into other strategic markets, either through organic growth or acquisitions. In 2006, for example, we purchased Resin Trade in the U.K., the largest polymer distributor in that country, and the coming years, we are forecasting further geographical expansions, as we aim to become truly a global player by 2025. Our constant growth is our endless success.
Muhamad: Very nice Mr. Arul, and that's a really excellent overview. I would like to ask you your views on the market. 2020 and then 2021, I think you would agree, one of the most unpredictable years in the polymer business. At this point, can you share with us, with your years of experience and knowledge, what do you think, Mr. Arul, will be the key drivers in our markets in 2022?
Mr. Arul: Indeed Fadhil, it has been an interesting way this past two years. As a market, I think one of the positive outcomes of the pandemic, if you can have one, has been the recognition of the value and importance of the plastics in our lives from the PP01 mask we use everyday to protect ourself, to PE syringes to vaccinate our population, to the individual packages we now consume, the world has seen the value that plastics bring to the society. As far as drivers for 2022, I think the only thing we can all count is the continued high level of uncertainty, for example, all the uncertainty and the challenges around the global logistics that are pushing for further use of inventory hubs, and alternative shipping solution. But if I had to pick one or two things that were not a factor in the previous years, and I think will have a significant impact on our business going forward, I would say it is inflation, and the role of China.
I think inflation, which has been creeping up globally, will ultimately curb some of the polymer demand growth we all have been enjoying. The big explosion of the packaging demand driven by the new home economy, for example, is mostly behind us. So, although I'm optimistic about the future, I think it is reasonable to assume that demand growth for plastics will eventually slow down in 2022. On the supply side, on the other hand, we have many new capacities coming on stream this year, primarily in China and the USA, but also in other countries like Vietnam, Malaysia, and India, so I do anticipate emerging compression for producers as a result of that. The other key driver is the change of China's role in the global supply and demand moving from a major buyer of resins to a balance to perhaps exporter of some polymers like PP, for example.
Muhamad: Indeed, Mr. Arul, you've raised an excellent point on inflation. I think this is something we really need to closely watch. Mr. Arul, I want to explore a bit deeper one of our favorite topics, which you alluded to earlier, which is China. How will the PP supply in China impact or even constrain Middle East producers?
Mr. Arul: Yes, Fadhil. We have to talk about China. At the end of the day, it is the largest polymer market in the world. So anything China does has significant impacts for the entire industry. We have already experienced some of the changes in 2021 where China went from buying every ton it could find in 2020, even at high prices, to in 2021 exporting thousands of tons of PP to markets as far as Latin America, Europe, and others. I think that would only increase going forward. That means, Middle East producers will no longer be able to count on China to take the bulk of the PP produced here in the region at good prices, that is forcing the Middle East producers to reconsider their strategic positioning. Some markets that in the past were not considered strategic and even relevant will now need to come into picture. Still the Middle East producers have raw material cost advantage and high-quality products, so ultimately, I think they will continue to be successful, but at least for a while it'll be very challenging, and profitability will be under attack.
More broadly, I would like to say that the changes that are taking place in China will have a significant impact, not only in the Middle East producers, but in the entire trading partners and supply chain of the global industry. All that I said, I think distributors like RAI, Polydist who is well-positioned globally with local know-how, and relationship, and tremendous logistics experience, and flexibility will play more significant role offering great value and solutions to the suppliers as well as converters.
Muhamad: Thank you, Mr. Arul for yet another excellent answer. In my opinion, China will fundamentally restructure the polymer market this year with significant trade-flow implications. Now, let's move on to the other corner of our globe, the U.S. The U.S. as a PE producer exported less to Asia for much of COVID-19. Do you think this will change in 2022, or what will make U.S. a dominant PE producer again, like what we saw in 2019?
Mr. Arul: I'm not sure it'll be like what we saw in 2019, even a certain degree of regionalization of business prompted by global logistic challenges, and the impact of supply additions in China that is not only happening in PP but also in PE, but I have no doubt the U.S. will be much more active exporting in 2022 and 2023 with all the new capacities coming on stream, not only the existing players like Exxon and Noah, but also the most important capacities of new entrants like Shell with their completely new business model, or new entrants in the regions like Baystar, the JV of Borealis with Total, or SABIC with its JV with Exxon that has just come on stream. The new entrants will seek to establish a local position and will push the existing players for the market share. At the same time, they will need to sell out the plant and will have to be aggressively promoting their new products wherever they can. The North American suppliers will likely to regain some ground loss in Latin America, Europe and Africa before they go to Asia, especially China, but they will likely to participate in a certain degree in that market with LDPE metallocenes, and other resins. I don't think this happens more notably until the second half of 2022, but most certainly, by the end of the year, unless enforcing natural disasters, which could further delay the startups, we will again see active U.S. producers aggressively looking for markets all around the world with their competitive feed stock.
Muhamad: Thank you so much, Mr. Arul. You've given me a lot of food for thought. I'd like to welcome, again, Mr. Tareq. I am pleased, Mr. Tareq, to hear RAI is working on an exciting project, P-Life. As I understand, this is the world's first and only 100% oxo-biodegradable plastic additive. Please tell our audience more about this project, and what makes it so different?
Mr. Tareq: Thank you for that great introduction, Muhamad. That's absolutely correct. As you know, there are many products in the market that do cover different aspects of the biodegradation process. However, P-Life, our product, is the only one thus far that in our opinion covers all of the bases. It's a Japanese technology, and stands for Programmable Life. The idea is that we program the expiration date of the plastic product. Rather than a plastic bag or a bottle cap, say, taking hundreds of years, by adding P-Life additive during the converting process, we can shorten the biodegradation time period down to one to two years. Where P-Life differs from other technologies in the space is on three fronts. First of all, P-Life has demonstrated a 93% biodegradation rate on the Swedish standard SPCR 141, which is considered one of the most stringent standards in the world.
This was demonstrated in just two years without showing any plateau. This means that the likeliness of any microplastic being left in the environment long-term is highly unlikely. Secondly, P-Life has undergone testing not to negatively impact the recycling stream or the integrity of recycled end-products. The reason for this is that P-Life's active component was designed to only survive a single heat history. So it is active during the converting process, but not during the recycling process. The importance of this is that it means that this technology is in harmony with the global recycling initiative. The third and final point about the technology is its effects on the soil and plant life. Soil toxicity testing was also conducted by the Swedish RISE Institute. What they did is allow the plastic containing P-Life additive to biodegrade in the soil first, then they planted seeds from various agri-species into the soil in order to study their growth. The plants were then analyzed for a number of contaminants. We are happy to report that P-Life also passed this crucial test with flying colors. So it is really P-Life's multifaceted technology features that makes it a unique asset for the industry, and the fight against plastic pollution.
Muhamad: Very fascinating, Mr. Tareq, and I feel that I've learned a lot about P-Life. In your opinion, what is the future roadmap or next steps for P-Life?
Mr. Tareq: That's a great question, Muhamad. I think it is important for us as RAI to get the word out there that this technology does exist. We're currently selling our product in the GC region and Japan, but the potential applications and demand for this product are truly tremendous. So our plan in the medium-term is to take this product globally.
Muhamad: And my final question, Mr. Tareq, this is a hot topic in our region, as you know, why is sustainability such an important theme for the Middle East and the Middle East producers?
Mr. Tareq: I think that Middle East countries are realizing their place in the global supply chain more than ever before. The Middle East, for instance, today is the world's largest plastic net exporter by far. It is increasingly a region that is positioning itself as a leader rather than as a follower in the industry. With this influence also comes responsibility, and I think as Middle East countries further invest and participate in the global climate change initiative, they will wanna take a leading role in sustainability as well.
Muhamad: Mr. Arul, Mr. Tareq, thank you very much. Your insights are all excellent. I wish we can go on, but due to time constraints, we must draw to a close now. It's been a pleasure talking to you. And thank you to everyone for listening. If you've enjoyed this podcast, please be sure to tune into our other episodes in our series, "Global Polymer Conversations." For more information on Argus's petrochemicals product coverage, please visit argusmedia.com/petrochemicals. Thank you.