Alujain Acting CEO says polypropylene markets to face structural changes, expects mixed results in Q4 2021

Khalid Al Dawood, Acting Chief Executive Officer of Alujain Holding

Khalid Al Dawood, Acting Chief Executive Officer of Alujain Holding Corp, said that polypropylene (PP) markets will face structural changes in the coming period, the most important of which is the new huge production to be supplied to the markets by China and the requirements related to environment and sustainability.

China will mostly shift from an importer to a self-sufficient country, Al Dawood told Argaam in an interview on the sidelines of the 15th Annual GPCA Forum in Dubai.

He added that the Asian country might also turn into an exporter some times. When it reaches this production volume, being the biggest consumer of polypropylene, China will be a key player in setting prices and will mostly play the role of the “weighted product”.

Exporters, including the GCC countries, might face dumping-related problems in some traditional markets, Al Dawood noted, adding that China’s status will have more impact on some producers that are deemed as the closest and biggest markets by the Asian country. Those producers will need more efforts to deal with a new type of competition and look for other markets and consumers. Such markets will mostly be in the West, such as Europe, Turkey, South America and Africa.

When production outgrows demand, product differentiation becomes important. Competition will not only be limited to output volume and cost, but will extend to quality and marketing efficiency. Producers of high-quality products will achieve better profitability. Elsewhere, Al Dawood expected China to reach self-sufficiency in PP within five to seven years. If the world does not succeed in starting the production growth cycle at a level higher than the previous average, the impact of higher demand will be clear for everyone.

Alujain invests in National Petrochemical Industries Co. (NATPET) in the right way, as it continues to raise production efficiency, expand output volumes to leverage on the company’s strengths. Alujain will also compensate NATPET for the delay in expansion and invest in NATPET’s success as a producer of a unique set of products, compared to other competitors. NATPET has a slew of major clients who are satisfied with the product in profitable, strategic markets.

The company successfully addressed supply chain challenges. The pandemic granted Alujain the opportunity to use unconventional export methods and tools to ship its products to clients and avoid potential delays of traditional shippers.

Meanwhile, Al Dawood noted that Alujain has not yet joined the Shareek program.

The company aims to expand at the nearest mostly through increasing production capacity. Alujain will also eye any acquisition opportunities and currently focuses on boosting production.

“Volatility in prices was clear and significant this year. There was a great variance between product prices and shipping costs in regional markets. The fourth-quarter results are expected to be mixed, but will be better than those of Q3 2021,” Al Dawood said.

The fourth-quarter performance will be determined by a successful marketing plan, especially for those companies that sell their products in spot markets rather than contracts. The next year will see reasonable growth in demand amid healthy selling prices, assuming that the latest COVID-19 variant will not lead to closures or have a major impact on supply chains.