Petrochem boss feels market is set for brighter days

The Petrochem Middle East plant with its new 10 vertical storage tanks. Jeffrey E Biteng / The National

The market for petrochemicals seems to have turned the corner, according to the region’s largest petrochemicals distributor.

“The last three years have been challenging for the chemicals and energy sectors,” Yogesh Mehta, the managing director and joint owner of Petrochem, told The National following the completion of the fourth phase of its expansion at Jebel Ali Free Zone.

He said oversupply and a market cluttered with too many players with wildly varying capabilities, together with softer demand, had eaten into margins.

“But the environment is getting better this year and we are having a good first quarter and hope to have a good year,” Mr Mehta said.

“Prices have bottomed out and that makes for a stable environment for energy and the chemicals industry,” he said, forecasting that oil prices – to which many chemicals’ end prices are linked – is likely to trade between US$50 and $60 per barrel this year.

He said gross margins on turnover are back to 2.5 to 3 per cent for Petrochem, which last year had global sales of about US$1.1 billion.

The company has been operating out of Dubai since 1995 and is ranked by ICIS, a chemicals industry data firm, as the top independent distributor in the region and No 11 in the world.

The expansion has grown the storage facility out to 10 tanks from seven at Jebel Ali. Together with the chemicals they contain – which are the raw material for a range of products in the paint and packaging industries – the asset there is now worth about $150 million, Mr Mehta said.

Jebel Ali is the largest of the two facilities – the other is near Cairo in Egypt – that distribute to 27 countries throughout Africa, the Middle East and Asia for the company.

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