While operational resilience marked the industry’s performance in 2023, strategic moves and partnerships played an equally crucial role in shaping the sector’s future. Several landmark acquisitions and consolidations demonstrated the region’s commitment to global market expansion.

Strategic consolidation and global partnerships

Since the 1970s, GCC governments have pursued strategic partnerships with international players to diversify their economies and enhance global competitiveness and operational efficiency. Over time, these partnerships helped bridge the gap in expertise, technology, and market access. New partnerships fuel further growth across the region and will continue to strengthen its global footprint.

Merger and Acquisition (M&A) activities witnessed during the year have primarily focused on diversifying product portfolio and expanding market reach. In 2024, ADNOC’s acquisition of Covestro and its majority stake in Fertiglobe, showcased its strategy to expand into high-tech specialty chemicals and low-carbon ammonia and fertilizers, aligning with its ambition to become a top global player in the chemicals and energy sectors.

Trade agreements opening new horizons

Free trade agreements (FTAs) are expected to reduce trade barriers, enhance market access, and foster deeper economic integration. By offering preferential tariffs, streamlined customs procedures, and potential technology transfers, these FTAs could significantly boost the competitiveness of GCC exports in global markets. Following a successful FTA signing with South Korea in 2023, the GCC has intensified its engagement with other major economies:

China: After years of negotiations that started back in 2004, the GCC-China FTA remains a high-priority goal for both parties. While not yet finalized, recent dialogue and calls to speed up the FTA negotiations suggest an imminent commitment to achieving an agreement that would unlock trade potential between one of the world’s largest economies and the Gulf states.

United Kingdom: Talks with the UK are advancing, with both sides prioritizing stronger trade ties post-Brexit. Both sides have reiterated their commitment to concluding an FTA in 2024. Despite these developments, the agreement remains unsigned. This can be attributed to the complexity of negotiating terms that satisfy all parties, which has extended the timeline.

New Zealand: On 31 October 2024, the GCC and New Zealand concluded a comprehensive FTA, marking the GCC’s first high-quality trade deal with a major agricultural exporter. This agreement will eliminate 99% of tariffs on New Zealand’s exports over the next decade and complements the existing NZ-UAE Comprehensive Economic Partnership Agreement (CEPA).

Indonesia: The GCC and Indonesia officially launched FTA negotiations on 31 July 2024, targeting completion within 24 months. This partnership is expected to further deepen trade relations between the GCC and Southeast Asia.

Türkiye: The GCC and Türkiye began Free Trade Agreement negotiations in July 2024, aiming to finalize the agreement as soon as possible. With an estimated USD 2.4 trillion trade opportunity, the FTA aims to reduce customs duties and improve market access, potentially opening significant opportunities for chemical trade between the regions.

Impact of global events

The regional petrochemical industry in 2024 was profoundly shaped by a confluence of global events, presenting both challenges and opportunities for the industry.

• Geopolitical changes and uncertainties

Rising geopolitical tensions in the Middle East, particularly in the Red Sea region, have raised concerns over the security of key shipping lanes. With a significant portion of global petrochemical exports relying on these maritime routes, the industry faced heightened risks of disruptions, increasing insurance premiums, and delays in supply chains.

The resulting higher costs on consumer goods contributed to fueling global inflation. Additionally, renewed instability in other regions, coupled with Trump’s return to the US presidency, have added layers of uncertainty to global trade policies and energy markets, with implications for demand and pricing strategies in key export markets.

• Major developments in the global petrochemical sector

China’s petrochemical expansion: China’s rapid expansion in petrochemical production continues to influence global markets. Between 2019 and 2024, China has added substantial production capacity for ethylene and propylene — the two most crucial petrochemical building blocks — equivalent to the combined existing capacities of Europe, Japan, and Korea. This surge has led to an oversupply in certain markets, exerting downward pressure on global prices, and necessitating strategic responses such as leveraging cost-efficient feedstocks, enhancing operational efficiencies, and exploring new trade partnerships.

European plant closures: Concurrently, Europe’s petrochemical industry faces a wave of plant closures driven by high energy costs and stringent regulatory pressures. In 2024, several major facilities were shut down, including ExxonMobil and SABIC’s cracker units, removing significant production capacity from the market. These closures present a long-term opportunity for GCC producers to strengthen their foothold in the European market.

Shifts in automotive and EV manufacturing: The recent closure and production cuts of electric vehicle (EV) plants, primarily driven by reduced demand and high costs, have disrupted the demand for advanced plastics and specialty chemicals used in EV production. However, traditional automotive sectors remain resilient, ensuring steady demand for petrochemical derivatives like polypropylene and ABS (acrylonitrile-butadiene-styrene).

These global market dynamics evolved against a backdrop of increasingly stringent regulatory requirements. For the GCC chemical sector, 2024 marked a pivotal year in adapting to new environmental and safety standards.

Regulatory compliance and adapting to new realities

The year 2024 marked a critical period in climate policy implementation, with COP29 in Baku, Azerbaijan, building on previous commitments toward the Paris Agreement goals. The conference reinforced the urgency of industrial decarbonization and strengthened the global commitment to circular economy principles. For the GCC petrochemical sector, these developments accelerated the transition toward sustainable practices and innovative solutions, setting the stage for several key regulatory developments throughout the year.

• INC-5 in Busan: Stricter global environmental standards

The fifth session of the Intergovernmental Negotiating Committee (INC-5) in Busan advanced efforts to finalize a legally binding international treaty on plastic pollution. The Chair’s streamlined 22-page draft outlines measures to control single-use plastics, promote sustainable product design, and establish financial support for developing nations. The treaty addresses the full plastic lifecycle, emphasizing recyclability, preventing marine leakage, and supporting informal waste management workers.

For the regional petrochemical industry, the treaty could drive shifts in production processes, investment in recycling technologies, and compliance with stricter regulations. Active engagement in negotiations is vital for stakeholders to adapt and influence global plastic governance.

• CBAM:

The European Union’s implementation of the Carbon Border Adjustment Mechanism (CBAM) introduced a carbon price on the import of certain goods, including petrochemicals, based on their carbon emissions. This measure aims to prevent carbon leakage and promote cleaner industrial practices. GCC exporters to the EU now face the imperative of quantifying and potentially reducing the carbon footprint of their products to maintain competitiveness in the European market. CBAM will apply in its definitive regime from 2026, while the current transitional phase lasts between 2023 and 2025. During the transitional phase, importers into the EU are required to report the greenhouse gas (GHG) footprint of CBAM products quarterly.

• IMO 2024 Maritime Regulations:

In 2024, the International Maritime Organization (IMO) introduced pivotal regulations affecting the petrochemical industry. Key measures included life cycle GHG intensity guidelines for marine fuels, stricter safety standards under the updated IBC Code, and a heavy fuel oil ban in Arctic waters to mitigate environmental harm. These developments underline the IMO’s commitment to sustainability and maritime safety. For the regional chemical sector, adapting to these regulations requires a careful balance between growth ambitions and sustainability requirements.

Industry outlook

The GCC chemical industry is poised for significant expansion over the next five years, with planned capacity additions of approximately 20.1 million tons phased across multiple stages. The immediate horizon (2024-2025) will bring 8.3 mtpa of new capacity, primarily in basic chemicals and polymers, followed by a more substantial wave of 9.7 mtpa during (2026-2027) across diverse product segments. Beyond 2028, the focus shifts toward agri-nutrients and specialty chemicals, reflecting the industry’s strategic diversification.

This growth trajectory is backed by substantial financial commitment, with the industry pledging USD 30.6 billion in capital investments through 2028. A notable strategic development includes Aramco’s move to acquire a majority stake in Petro Rabigh through a USD 702 million deal, signaling continued industry consolidation.

The global market landscape presents both challenges and opportunities. While China’s increasing chemical self-sufficiency is reshaping traditional trade patterns, it remains a critical market for ethylene derivatives (primarily polyethylene and ethylene glycol) from the US and Middle East during the next 10 years. The industry faces moderate demand growth with regional variations, while navigating current economic headwinds of inflation and weak demand.

On the sustainability front, upcoming global initiatives like COP30 are expected to strengthen climate commitments, while ongoing INC-5 discussions signal an evolving regulatory landscape. The industry must balance these environmental imperatives with economic realities, adapting strategies to meet both sustainability goals and market demands.

Conclusion

The GCC petrochemical industry stands at the cusp of a pivotal inflection point, where operational resilience meets transformative challenges. The sector’s performance demonstrates its fundamental strength, maintaining a 93% capacity utilization rate against global averages of 75-81%, while contributing 33% to regional manufacturing GDP in 2023.

However, this position of strength must now evolve in response to three converging forces that will reshape the industry landscape over the next decade: the market reconfiguration driven by China’s massive expansion and EU plant closures, the accelerating energy transition driving new product demands, and the evolution of environmental regulations reshaping trade dynamics.

The implementation of CBAM, strengthened IMO regulations, and the emerging global plastics treaty signal an irreversible shift toward stringent environmental standards. The industry’s commitment of USD 386 million for environmental initiatives (2024-2027) and achievement of an 11.7% reduction in CO₂ intensity marks a step forward, but the scale of future regulatory challenges necessitates a more comprehensive transformation.

The industry’s response is taking shape through a USD 30.6 billion capital investment pipeline and planned capacity additions of 20.1 million tons through 2028. These investments must be viewed through a strategic lens that balances:

• Portfolio optimization: The shift toward specialty chemicals and agri-nutrients post-2028 indicates recognition of the need for higher-value products.
• Sustainability integration: Environmental investments must evolve from compliance-driven to value-creating initiatives.
• Innovation acceleration: Current R&D intensity of 0.5% versus the global average of 0.8% suggests room for enhanced innovation focus.

Looking ahead, the GCC chemical sector will strengthen its position in global chemical value chains by expanding beyond its traditional advantages.

The next phase will be characterized by an increased focus on sustainable solutions, specialty chemicals, and high-value products, enabled by digital technologies, advanced recycling capabilities, and low-carbon production processes.

Trade patterns will also shift as new agreements with Asian economies mature and European markets undergo restructuring.

For industry leaders, this transformation demands careful orchestration of investments, capabilities, and partnerships to balance short-term operational excellence with long-term strategic imperatives. The choices made in the next few years will determine the industry’s position in an increasingly complex and sustainable global chemical market.