Value-added segments to boost Qatar's industrial exports

In July 2019 Qatargas announced it delivered its 3000th liquefied natural gas (LNG) shipment to Japan since Qatar’s first delivery of the resource in early 1997. In the interim years, Qatar has become the world’s largest LNG producer in the world, producing 77m tonnes a year. According to BP’s “Statistical Review of World Energy 2019”, Qatar was the largest exporter of LNG in 2018, exporting 104.8bn cu metres. All the same, the Gulf country is looking to diversify its exports to include a broader range of industrial goods, many of them petrochemicals. A wider range of exports would cushion against commodity price fluctuations, especially as global LNG prices fell to a 10-year low in early 2020.

Statistics

The importance of diversification was evident in Qatar’s recent trade performance. Total exports fell 17.5% year-on-year in the fourth quarter of 2019, from QR79.7bn ($21.9bn) to QR65.7bn ($18bn), according to the Planning and Statistics Authority. The fall was largely due to lower exports of mineral fuels and lubricants (down 17.3%), chemicals (down 21.3%), crude materials (down 27.3%) and machinery and transport equipment (down 40.4%). However, the value of exports of manufactured goods grew by 6.7%, from QR2bn ($548.9m) to QR2.2bn ($603.8m). Additionally, the dominance of oil and gas products is slowly ticking down, from 87% of total exports in the first nine months of 2018 to 85.6% over the same period in 2019.

Marketing Agency

Qatari companies have moved to centralise and consolidate the sale, marketing and distribution of their products to encourage exports. In 2012 state-owned Qatar Chemical and Petrochemical Marketing and Distributing Company, known as Muntajat, was created to be the exclusive marketer, distributor and seller of downstream products including polymers, chemicals, fertilisers and steel. Muntajat has worked to sell industrial products to more than 135 countries, and it operates an advanced supply chain network. The firm manages operations for Qatar Fuel Additives Company, Qatar Fertiliser Company, Qatar Vinyl Company, Qatar Petrochemical Company, Ras Laffan Olefins Company and Gulf Formaldehyde Company, among others. The most recent local addition to Muntajat’s portfolio was Qatar Steel Company (QS), with the steel producer announcing in February 2018 it would shift sales, marketing and distribution to the marketing company. QS noted in its 2018 annual report that in the wake of the 2017 blockade, the firm had to shift all of its export sales to non-GCC markets and export 40% of rebar produced in Qatar because of a dampening of domestic demand. In the report, QS said it hoped Muntajat’s global reach would help it connect with opportunities in new markets.

New Industries

Despite the geo-political impediments to trade, companies are hoping to establish themselves as manufacturers and exporters with a wide reach. “We have to consider what is economically viable for Qatar to export beyond petrochemicals, aluminium and fertilisers,” Ullattil Achu, group general manager of privately owned holding company Dyarco International Group, told OBG. “One possibility to add value will be in polyethylene-related businesses. For instance, at our pipe factory we import joints and fittings, and if those were made at home in sufficient quantities, they could be exported. We would, however, need to identify growth markets for such projects and ensure pricing is right.”

With an 82% increase in Qatar’s petrochemicals production expected by 2025, a significant increase in polyethylene production could spawn new value-added industries with the capacity to sell their manufactured plastic products abroad at competitive prices. The government has committed to investing in petrochemicals production, and it will be important for the private sector – and especially entrepreneurs – to identify markets and consumers.