Life at the cross-roads: what does the GCC offer PU?

Dubai and the other GCC nations are at one of the world's commercial crossroads, what does the region offer the polyurethane industry? Simon Robinson finds out.

There has been spectacular population growth in the Gulf Cooperation Council (GCC) nations over the past 25 years. The overall number of people across the region increased almost three-and-a-half times between 1983 and 2018. Population growth rates spiked in about 2008. They are now slowing in countries other than the UAE, which grew between 2013 and 2018, according to World Bank figures.

The largest nation in the trade group is Saudi Arabia. During this period, its population has grown from 11.7m people to 33.7m. Its increase in population outstrips that of all the other GCC nations combined, which added 13.2m people from a base of 4.8m.

Increasing wealth

The region also got richer, in some cases remarkably so. World Bank statistics show that the region had an average GDP of $35.2bn in 1983. The top of the pile was Saudi Arabia with $129.2bn, and Bahrain, with $3.7bn, brought up the rear.

By the end of the period, Bahrain’s GDP had grown slightly faster than the average for countries in the region and was 10 times larger at $37.7bn. Qatar, however, is the standout. Its GDP has grown to almost 30 times its size in 1983 from $6.5bn to $191bn. In the same timeframe, the UAE increased from 33% of Saudi Arabia’s GDP to 53%.

This has to be good news for the use of polyurethane. Typically, the demand for polyurethane grows by about three percentage points more than the rise in GDP. Industry leaders in the region confirm this.

But the market in the Middle East is largely undeveloped, with great potential for future growth, according to Philipp Propst, project manager and head of PU research at IAL Consultants. As history has shown, some countries suffer from political instability, and the fluctuating price of oil could be seen as a disadvantage. But, Propst argues, this is helping countries diversify their industrial base into other areas, which could help polyurethane and other industries.

Growth Potential

A lot of each nation’s potential for growth comes down to the size of its population, wealth and rate that the wealth is growing. Wassim Bawab, managing director Baalbaki Group, based in Sharjah, UAE, said that Egypt has around 100m people; there are about 35m in Saudi Arabia and 10m in the UAE. UAE is the best location to serve this market.

Bawab said that the UAE provides a good hub for serving the region, and also the rest of the world. He explained that the adhesive market is significant, despite being much smaller than other PU segments such as rigid and flexible foam. ‘It is one of the segments that we have been developing and promoting globally since 2017,’ he said. ‘We have a specialised business unit to push technology and commercial development. It’s going quite well. We have sold products all over the world, from Vietnam to South Africa to the CIS to the Dominican Republic.’

The demand in the GCC and other nearby countries is split between rigid and flexible polyurethane formulations and applications. IAL’s Propst believes the UAE is at the forefront in terms of thermal insulation usage in the region. ‘Polyurethane insulation is already common for new construction projects,’ he said. ‘The Abu Dhabi Planning Council’s Estidama programme has made sustainability of urban planning and construction compulsory, and consequently the market for rigid polyurethane panels is growing at a fast pace.’

Building improvement

He added that Saudi Arabia is the next country expected to follow in the footsteps of the UAE in terms of sustainable building practices. ‘The government has introduced a scheme in which sustainable building designs will play a vital role in the attempt to reach the country’s 2030 energy goals,’ he explained. ‘Polyurethane rigid-faced panels are expected to be mainly used in roofing applications and wall insulation for warehouses and other commercial applications.

Dubai-based Akil Sahiwala, sales director for PU Middle East & Africa at Dow, said that a large volume of polyurethane insulation in the Gulf is used in roofing applications. ‘Often this is used as spray-foam or in combo-roofing systems,’ he said. ‘These are roofing systems with a layer of waterproofing, a layer of spray foam, a layer of screed and cement. It is a fully finished roof.’

He added that the big question is how much insulation is actually needed. ‘At first it was minimal, now the standards are getting stricter and greater k value, better insulation capacity is needed,’ he said. ‘The goal is to reduce energy consumption and improve waterproofing.’

Roofing is an area of particular interest to Dow, and it is working with partners to devise the next generation of combo roofs. ‘Combo-roofs are designed with the waterproofing buried within the structure,’ he said. ‘The key question is how to reduce the weight on top of the roofs.’

Setting standards

Although the GCC is a trading block, it has yet to harmonised standards in quite the same way as the EU, Sahiwala added. ‘This is shown in the way that different insulation levels can be acceptable within the same nation,’ he said.

Propst explained that most panel manufacturers in the region still produce panels using discontinuous processing. ‘Continuous production will increase as soon as the demand grows to a significant level,’ he said.

Compared to Saudi Arabia, the demand for PUR/PIR rigid foam is significantly smaller in most countries in the Middle East and Africa, and PU rigid-faced panels are no exception. Bawab has a slightly different perspective. His company has been operating in the UAE since 2005 supplying PU systems, polyester polyols and PU specialties.

‘Rigid foam is used mostly by panel makers,’ he said. ‘The country is highly regulated for fire and smoke performance of insulation products used in construction. We have developed systems that meet the highest European standards.’

Safety first

Some of these changes in regulations were introduced in the aftermath of a serious hotel fire on New Year’s Eve 2016. ‘The authorities have taken a long look at regulations,’ he said. ‘Abu Dhabi and Dubai lead the legislation on fire safety requirements.’

In the spray foam market, he added, customers are starting to ask about alternative blowing agents he said. Saudi Arabia is already moving towards third-generation blowing agents, he said, while in nearby non-GCC Jordan, regulations are now in place to force this change. Egypt, a large market outside the GCC, has also moved from 141-b to alternative blowing agents, he added.

Dow’s Sahiwala agreed that spray foam is an attractive regional market. ‘It has been growing across the board,’ he said. ‘We estimate that this is in excess of 25kT/year in the Middle East – UAE, Saudi Arabia, Qatar and Yemen. Spray foam has been growing because of energy efficiency standards that are being implemented across the region. As these standards get stricter, thickness of the spray foam used increases.’

Quite Complex

However, the situation is quite complex. ‘The standards can vary across the Emirates,’ he said. ‘Abu Dhabi has the strictest standards. It aims to be more sustainable and is more LEED driven, with more LEED-compliant buildings. Spray foam in this region is HCFC 141-b blown. While this has been phased out in many countries, it is still used here. There are projects in Abu Dhabi that require zero ozone depletion potential blowing agents and less than 5 GWP.

He added that third-generation blowing agents are now becoming more common in the region. ‘Dow has developed some premium formulations based on these,’ he said. ‘The choice of material depends on the project specifications and who is writing them. While there is no government mandate in the other Emirates for third-generation blowing agents, there are many projects in Abu Dhabi that require them.’

Binding answers

The CASE sector is not very big in the region, Sahiwala said. ‘But the foam binders business is growing,’ he said. ‘We supply a lot of binders for underlay and also Arabic seating such as majlis seating. Rebonded foam with a layer of memory foam on top will make a good mattress.’

There are two sides to the binders business: flexible foam and rubber-crumb binders. These are used mainly in playgrounds. While this is a growing market, it remains smaller than flexible foam binders, he said. ‘There is a growing need for children’s playgrounds and running tracks across the region,’ he claimed. ‘This is driving growth. It’s difficult to quantify percentage growth but it is higher than GDP. It also depends on markets.’

Returning to Saudi Arabia, there is strong growth in the construction industry , across both residential and commercial. ‘The share of PU rigid-faced sandwich panels is still relatively low, but the market is expected to grow at a fast rate for the forecasting period,’ IAL’s Propst said. ‘The developments in Saudi Arabia are likely to spread to surrounding countries in the future.’