information | analytics | expertise november 23, 2014 … · a tiny domestic market and a scarcity...

Information | Analytics | Expertise

NOVEMBER 23, 2014

© 2014 IHS

Information | Analytics | Expertise

9th Annual GPCA Forum

John Page, Vice President, Global IHS Chemical Consulting +44 20 8276 4760 [email protected]

ECONOMIC DIVERSIFICATION: THE BENEFITS OF VALUE-ADDED DOWNSTREAM CLUSTERS

© 2014 IHS

Industry Cluster Development: Foundations & Benefits

GPCA Cluster / November 2014

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Cluster Definition

“A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities.” -- Professor Michael Porter, Harvard Business School, On Competition

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How does a cluster work?

Human Resources

Technology

Access to Capital

Regulatory Environment

Physical Infrastructure

Economic Foundations

Network of Supplier Firms

Firms supplying Inputs, Raw materials, Component Parts, and Specialized Services

Leading Firms

Key firms exportingGoods and ServicesOutside the Region

Copyright © 2001 Economic Competitiveness Group, Inc.

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Types of Clusters

Geography

Vertical connections

© The Gulf magazine, October 2013

Sector/ Horizontal connections

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Middle East’s Vision for Economic Development: How Clusters Can Help?

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• Jobs and employment growth

• Higher productivity (increased wages)

• Innovation & opportunities for entrepreneurship

• Economic diversification

• International competitiveness

• Opportunities for local SMEs to participate in cluster supply chains

• New skills for local workforce

• Closer collaboration (public, private, academic)

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Building Value-Added Clusters Starting from Chemicals


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Clusters, make the impossible possible? GPCA Cluster / November 2014

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Making the Impossible Possible – Jurong Island Singapore

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Singapore is a major refining and oil trading hub despite no domestic raw materials, a tiny domestic market and a scarcity of land. But Singapore is using key advantages; • Access to feedstock: established hub

and relationships with global companies

• Asian location to serve growing markets

• Supportive business environment (Free Trade Agreements, labour laws, political stability)

• Government support • Attractive place to live and work

© 2014 IHS

Jurong Island Singapore What does it offer?

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A ‘plug and play’ environment for investors; • Plant-to-plant pipeline networks • Buy and sell over the fence • Outsourcing of shared services,

utilities and storage • Two dedicated 3rd party

logistics parks • R&D facilities and Technology

Centre for skills and capabilities development

• Central security, fire and emergency services

• Secure investment climate

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For clusters petrochemicals value chains are diverse, from industrial applications to consumer goods….

Propylene Polypropylene Plastics Processing

Propylene Acrylates Paints and Coatings; Adhesives, Sealants

Benzene Polycarbonate Plastics Processing

Butadiene Rubbers Tyres

Butanediol PBT Flooring, automotive, coatings

Benzene/Toluene Polyurethane Systems Polyurethane Products

Propylene/Oxoalcohols

Phthalic Anhydride/ N-butanol Solvents, plasticizers

Ethylene PE/PVC/PET Plastics Processing

Ethylene/LAOs Ethoxylates Detergents

Propylene SAP Diapers; adult hygiene

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Availability of a wide range of chemicals is a critical enabler to downstream industries and cluster formation

Chemicals Component Products Industry Sector

Automotive

Sunroofs, LightsPolycarbonate

Moulded PartsPolypropyleneCarpets

Paints and coatingsAcrylates

Seating/UpholsteryIsocyanates & Polyols

PVC, plasticisersElectricalPVC, plasticisers

Polyethylene

Fuel tanks; ReservoirsPolyethylene

TyresSynthetic Rubbers (PBR, sSBR)

Carbon BlackUnder bonnet partsSynthetic Rubbers (PBR, sSBR)

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© 2014 IHS © 2014 IHS


Availability of a wide range of chemicals is a critical enabler to downstream industries and cluster formation

Chemicals Component Products Industry Sector

Automotive

Sunroofs, LightsPolycarbonate

Moulded PartsPolypropyleneCarpets

Paints and coatingsAcrylates

Seating/UpholsteryIsocyanates & Polyols

PVC, plasticisersElectricalPVC, plasticisers

Polyethylene

Fuel tanks; ReservoirsPolyethylene

TyresSynthetic Rubbers (PBR, sSBR)

Carbon BlackUnder bonnet partsSynthetic Rubbers (PBR, sSBR)

• Automotive vehicles are increasingly almost entirely composed of petrochemical products. Even the base metal structure can be replaced by carbon fiber.

• The trends increase petrochemical content per vehicle is strong. Light weighting and energy reduction initiatives support the use of high tech materials and polymers.

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The Phenol-Polycarbonate value chain is important in automotive but it also creates multiple other end use areas

CumeneBenzene Phenol

Propylene

Bisphenol A

Polycarbonate

Epoxy Resins

EpichlorohydrinChlorine

Caustic Soda

Phosgene

Acetone

Computer equipmentLCD TVs

Glazing, sheets

Car parts

Aircraft and missilecomponents

High performancecoatings

Electrical/Electronic, laminate

Adhesives

Electronic products &household appliances

Hydraulic binders & building materials and housing

Mechanical & Automobile

Transportation industry and systems

Wood and furniture industry

Leather and derivatives


Flooring & paving applications

Aeronautic & Aerospace


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Even methanol, one of the simplest chemicals products, has one of the most extensive set of derivatives

Fuels Formaldehyde Methylamines Dimethyl Terephthalate Acetic Acid

MTBETAME

Gasoline BlendingBio-diesel

DME

Methanol

MTO/MTP Others

Anti-freezeSolvents

Windscreen wash

UF ResinsMF ResinsPF Resins

POMBDOMDI

Others

DMFOther Solvents

Water Treatment

Feed AdditivesAgriculture

PET PBT

VAMPET

Acetic Anhydride

MCAAEsters

EthylenePropylene

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So what is the typical process to decide what might be the best products to select?

A tailored three step process to screening products, will follow a logical, sequential process:

1. Ranking and shortlist of first derivative products that can be made directly from available feedstocks

2. Ranking and shortlist of all remaining products that might be of interest based on key value chains to the location

3. Additional selection based on the shortlisted products and taking account of products which fit critical value or industry chains

During each phase of screening, the value chain is identified into which the intermediate / product is likely to fit.

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The initial product selection is the start of the journey as clustering helps downstream industries to become increasingly sophisticated over time


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Entry Level Conversion

Value Addition

Global Partnerships

Increasing • Product

sophistication • Technical

content • Value

generated • Entrepreneuria

l opportunities • Indirect and

induced jobs created

Time

Specialised tooling; equipment

R&D centre; technical services

Diverse, speciality chemicals

© 2014 IHS © 2014 IHS


The initial product selection is the start of the journey as clustering helps downstream industries to become increasingly sophisticated over time:

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Anchor Projects

Value Addition

Global Partnerships

Increasing Sophistication and Value Increasingly diverse entrepreneurial opportunities; Increasing indirect and induced jobs

Time

Crates

Household Goods Bottles

Pipes Automotive

sector Barriers for Food

CPGs Tyre

manufacturers Global Brands

Systems Houses (CASE)

Polymer additives

Specialised tooling; equipment

R&D centre; technical services

Diverse, speciality chemicals

© 2014 IHS © 2014 IHS


The initial cluster should provide important enablers and incentives for further downstream industries, and help to attract further investors…… • Competitive land, infrastructure, utilities, labour and raw material costs

• Promotion of shared services and synergies across downstream industries to reduce conversion costs

• Education and training for locals to enable more sophisticated products and markets to be accessed with time thereby developing a knowledge based economy

• R&D and technical service centers to improve product offerings

• Ongoing investment in intermediate chemicals to ensure local availability of specialty chemicals as downstream industries become more sophisticated

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Economic Impact Analysis (EIA)

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How has (or will) this investment in a cluster development affect the overall economy? • Direct Effects (direct activity) • Indirect Effects (suppliers) • Induced Effects (income) Measured along three key dimensions • Employment • Value Added (Contribution to

GDP) • Impact on Government Accounts

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Social Impact Analysis (SIA) adds additional insight…. • Conducted in tandem with EIA, SIA provides a way to capture data that

involves uncertainty or nuance • Adds qualitative insights to quantitative modeling results • Provides foundation for developing strategies for new business creation,

economic diversification, social development and regional competitiveness goals.

• SIA draws on four primary types of information: Nontraditional data

sources such as census data, IHS Consumer Credit Watch or global NGO indices and rankings Feedback from local

stakeholders gathered through interviews, focus groups or surveys

Specialized industry knowledge or subject matter expertise from experts (internal & external) Case studies from other

regions with similar circumstance or economic and demographic profiles

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Results of EIA and SIA EIA quantified the impacts of petrochemical manufacturing by phase:

1) Construction 2) Operations

Model results along two key dimensions: • GDP impact peak at ~5% above baseline • Model forecast over 70k additional jobs

SIA captured anticipated impacts on: • Other industries (e.g. tourism, water, energy) • Regional education & training institutions • New career pathways & opportunities for nationals and women in the workforce • Neighbourhood & infrastructure development (e.g. roads, electricity, water, housing, retail)

• Health, safety, quality of life, security, culture & heritage

01000020000300004000050000600007000080000

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Economic Impact on Number of Jobs

Total Impact # Construction Phase # Operational Phase #

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GPCA Cluster / November 2014 Creating an enabling environment for an industrial cluster can have a huge positive knock-on effect on general economic development and human capital through:

• Building infrastructure and shared services

• Making land available and usable

• Transportation improvements • Shared utilities • Financial infrastructure and

support • Creating investment and equity

sources

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• Availability of loans • Export insurance and

financing • Export incentives • R&D and Technical Centers • Quality standards and

certification • Industry associations • Workforce recruitment and

training

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Clusters Make the Impossible Possible GPCA Cluster / November 2014

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See the vision Select the products Value the opportunity Justify the investment

© 2014 IHS

Thank You!


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John Page, Vice President, Global IHS Chemical Consulting +44 20 8276 4760 [email protected]

information | analytics | expertise november 23, 2014 … · a tiny domestic market and a scarcity...

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