With the pace of industry change accelerating in the coming years, collaboration throughout the value chain will be an absolute must to realise and maintain the competitive advantage of the chemical industry in the Arabian Gulf, comments Dr Abdulwahab Al-Sadoun.
Arabian Gulf chemical producers are operating in an increasingly competitive marketplace environment. Growing competition abroad is driven by the move towards self-sufficiency in China and the US, the two largest global markets for chemicals, with the United States moving from a net importer to a net exporter off the back of the shale gas revolution in recent years.
The GCC chemical industry is significantly export-oriented, with over 80% of its output sent to 100 countries abroad. Asia represents the largest export market for the GCC chemical producers, accounting for 65% of total export, followed by Western Europe and North America with considerably smaller share – 10% and 7% respectively. Our regional industry, albeit, has the longest supply chain globally, making supply chain efficiency a crucial factor for maintaining its competitive advantage.
Over the ten year period between 2005 and 2015, the industry’s export pattern mirrored its capacity expansion drive, with export volume growing by 8.4% per annum. Through the expansion of major ports and building huge portside logistics facilities, supply chain infrastructure has grown in line with the region’s rapid development into a globally significant logistics hub. The industry’s capabilities to transport products on land and sea have grown dramatically, but to sustain this growth, chemical players should continue to improve the efficiency of their supply chain networks.
Since 2014, most GCC countries have improved their ranking on the LPI (logistics performance index), and are currently among the top 35% performers globally. Improving their global logistics competiveness is of particular importance for the national strategic visions of a number of GCC states, including Saudi Arabia’s Vision 2030, which aims to achieve a global ranking of 25, up from 49 currently. UAE occupies the highest position in the region on the LPI as 13th globally.
Infrastructure, customs and clearance procedures remain a challenge and need to be fully streamlined to ensure shorter lead times and timely delivery of our products. Our supply chain must be fully automated and modernised, capitalising on the latest digital technologies enabling significant cost savings and efficiencies. Another important challenge remains rising logistics cost, particularly for container and bulk shipping; therefore, cost optimisation will remain an absolute must. Currently, the average cost associated with the GCC chemical supply chains represents about 30% of landed product prices, thus having a large impact on profitability of chemical companies.
Building strong, transparent and reliable partnerships will be crucial in addressing future challenges. This was the underlying message from the 10th GPCA Supply Chain Conference, which called on the industry not only to collaborate from within but also with external partners in order to ensure its global competitiveness. Collaboration in supply chain was also singled out as the most important factor to retain competitive advantage in the latest GPCA report entitled ‘Supply Chain Collaboration in the Arabian Gulf’. The report, which gauged the views of 19 GPCA member companies, which collectively account for 75% of total chemical output by volume in the region, found that more than 52.6% of respondents see potential in securing various competitive advantages through intensifying collaboration.
What was even more striking was the role of increased collaboration with logistics service providers (LSPs), with 95% of respondents claiming that their company is taking strategic steps towards this direction, and 84.2% seeing collaboration with LSPs as a crucial tool to enhance operational efficiency and optimise costs.
GPCA has long recognised the need for increased supply chain collaboration, and continues to play a catalysing role in facilitating closer partnerships between the GCC chemical and petrochemical industry and LSPs. Through extending Responsible Care, the global chemical industry’s unique initiative to improve environment, health, safety, and security (EHS&S) performance, for the first time to LSPs back in 2017, and introducing the region’s only award category for the ‘Best Responsible Care Company for LSPs’, we aim to recognise excellence and encourage cooperation. Our networking events are aimed at facilitating knowledge sharing and discussion with key stakeholders from government, industry, regulators, academia, and even young professionals.
Dr Abdulwahab Al-Sadoun is the secretary general of the Gulf Petrochemicals and Chemicals Association (GPCA). Set up in March 2006, GPCA is a dedicated non-profit association, serving its members with industry data and information sources.