Solving the supply chain conundrum

Alan Yeap, Head, Polymers Section, CJP International PTE

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Alan Yeap, head of the polymers section at CJP International PTE, discusses the side effects of the surging capacities being witnessed in the Middle East market

What are the main drivers of demand in the Asian marketplace?

The two main drivers of demand for petrochemicals products are the high population in Asia coupled with the fact that petrochemicals products are replacing more traditional materials such as wood, metal and paper. For example, China has become the world’s manufacturing base so, despite the current financial downturn, demand is still relatively high for petrochemicals products compared to the rest of the world. Also, as the population becomes more affluent in Asia, domestic demand for consumer products is going to rise substantially in places like China and India. This is going to fuel demand even further in the coming years.

What will be the side effects of the huge expansion capacity from the region?

With the Middle East experiencing a huge expansion of petrochemicals production, it needs to ensure that it has the supply chain in place to handle the additional volumes. If that doesn’t exist, then problems are going to rise with regard to shortages in terms of tankers and storage facilities as well as bottle-necks occurring at ports. So the main issue for the region will be augmenting the kind of effective supply chain management that will allow each company’s logistical operations to match the higher volumes being delivered.

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We are here to look for reliable long-term suppliers. My company believes in long-term planning and I am here to help deliver that. We are not interested in short-term buying and selling because we believe that this will not help us to achieve our goals. So now we are looking towards 2010 and trying to put the groundwork in place now to enable us to be in a strong position to take advantage of the higher volumes of petrochemicals products that will be available from both the Middle East and Asia. Getting the right suppliers in place will help us with our sales and our customer relationship management over the next 12 months.

How do you foresee the market in term of supply and demand, and prices?

In the next three to four years, the boom in supply that will come from increased Middle East production is going to have a major impact on the market. The repercussions may be that petrochemicals prices will be subject to volatility and any potential glut of products on the world markets will obviously have an adverse effect on prices. However, global demand is going to differ significantly from regional demand so what you may see is different prices for different markets across the world. Petrochemical prices in manufacturing hubs like China and India may well be higher than in the European markets, for example.

What sorts of challenges are you facing with regard to your current job?

Between 2010 and 2015, a number of plants from the MENA and Asia region will go on stream; this is going to be a real challenge for us as a distributor of polymers in Asia. We are really looking forward to creating a solid supply chain management structure coupled with exceptional customer relationship management. As the middle man, we need to balance our relationships with long-term suppliers as well end-customers. I believe that the major petrochemicals players understand the risk related to the management issue, which is critical for the commodities business. It’s also true to say that market forces, such as supply and demand, the cost of production, social and political stability, and economic growth from both the regional and global perspective will all have both direct and indirect impacts on the petrochemicals business in the near future.