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Home > Reports > Annual Report 2020 > Market Review

2020 Business Environment

Throughout most of 2020, the COVID-19 pandemic caused disruptions to supply chains, demand, international trade flows, and travel, along with lockdowns and collapsing stock prices. Collectively, this dealt a heavy blow to the global economy and caused a sharp downturn.

Most major advanced economies – including the US, the EU, and Japan – and emerging economies – such as China, India as well as the Latin American and Middle Eastern and African economies –encountered marked slowdowns and, in some instances, tipped into recession. The trade dispute between the US and China further hurt business and investor sentiment around the world. In response to the declining economic growth, policymakers in many countries started providing more monetary and fiscal stimulus, which mitigated the adverse economic impacts to some degree.


Both advanced and emerging economies contracted sharply in 2020 as a result of the pandemic after recording moderate growth rates in 2019. There was an across-the-board deterioration in all major economic areas including fixed investment, private consumption, trade and industrial production. Soft energy prices and low demand for oil and energy products dealt a further blow to the growth of major oil and commodity-producing countries.


Saudi Arabian economic activity diminished significantly as a result of the COVID-19 crisis. The government’s lockdown measures to control COVID 19 brought large swaths of public life to a standstill. Religion-based tourism almost came to a standstill in 2020, severely affecting related service businesses. Industrial production also continued to decline. All this, together with softer oil prices and lower hydrocarbon revenues, caused a severe recession in Saudi Arabia. On the other hand, a slowdown in outbound tourism encouraged more consumer spending in the local economy.

The US experienced a recession in 2020 as COVID-19 cut through its economy. Uncertainty surged, risks widened, and equity markets saw strong volatility, wiping out trillions of household net worth at different times of the year. Consequently, consumers spent more cautiously and businesses put some investments on hold awaiting the outlook to improve. International trade also declined sharply. Residential construction, however, remained a bright spot during the pandemic, rebounding quickly in response to low mortgage rates and new demand for single-family homes in the suburbs. Joe Biden’s conclusive win in the presidential election reduced uncertainty and improved business and investor sentiment in the US.

There was a precipitous drop in China’s economic activity as a result of the measures it implemented to control the pandemic, particularly in the first half of 2020, with real GDP growth contracting heavily. While almost all major sectors of the economy slowed, consumer spending and exports were the ones most affected. The Chinese government implemented a stimulus package dominated by tax and business fee cuts and shifted bank lending to small and medium-sized private firms. The central bank expanded its monetary policy to increase liquidity in the system and support growth. The changes in the government’s fiscal and monetary stance resulted in a reversal of China’s “managed” structural economic slowdown, which is designed to move the country from a state-led, investment-driven economy to a market-led, consumption-oriented economy.

The Eurozone endured a severe recession as a result of the pandemic and associated lockdown restraints. All major economies of the Eurozone went through sharp recessions and slowdowns. Spain, Italy, and France suffered double-digit declines in real GDP, reflecting the severity of their virus outbreaks. Policy responses included substantial increases in European Central Bank asset purchases, large fiscal stimuli in many member states, and the European Union’s €750-billion Recovery and Resilience Facility. Monetary policy remained highly accommodative against a backdrop of low inflation. However, increases in debt burdens from already high levels threatened to negatively affect long-term growth prospects in many countries, along with challenging demographics and poor productivity performance.


Global industrial production, which was already growing at a meager pace in 2019, contracted heavily in 2020. While both advanced and emerging economies contributed to the global industrial recession, the industrial contraction was more pronounced in advanced economies than in emerging ones. Among major economies, industrial production growth decelerated significantly in the US, the Eurozone, Japan, China, and India.


As a result of the COVID-19 negative impact on the global economy, the petrochemicals industry saw a reduction in annual demand growth in 2020 in addition to a demand contraction of more than 4% year on year. Prices declined by 40% to 50% for some products and bottomed during Q2. As governments around the globe relaxed lockdown measures during Q3, demand began to recover, but not to the pre-crisis level. On the supply side, extensive turnaround schedules around the globe, along with the US hurricane season-related shutdowns, caused a decline in global and US supplies. This prevented further declines in prices in 2020. Recovery for some products like performance polymers and chemicals remained slow due to weak recovery in major downstream sectors like automotive and durable goods. However, in other sectors, such as consumer hygiene, healthcare, and packaging, demand for petrochemicals remained strong. The bright spot has been products like polypropylene for masks and gowns, and polyethylene for all types of packaging. Agri-nutrients prices remained weak as global supply surpassed demand.


Oil prices tumbled by 60% in Q2 2020 as supply floodgates opened to markets that were already reeling from a demand crisis. With the breakdown of the Vienna Alliance, oil markets had an unprecedented double shock: a demand crisis and market share war, pushing prices to multi-decade lows. Prices recovered by Q3 as OPEC+ coordinated to control supply and as demand slightly recovered with a gradual easing of travel restrictions.

Consequently, petrochemical feedstock prices reacted to the global economy and oil situation and followed oil to the bottom. Compared to 2019, oil prices declined by approximately 25% (year on year average) and averaged around low to mid-40s per barrel for Brent. Naphtha prices also declined by almost a similar percentage – around 27% – compared to 2019, US ethane declined by around 5%, and US natural gas prices declined by around 21% compared to 2019. Liquefied Petroleum Gas in Asia declined by around 18% as demand weakened with the global economic slowdown.

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