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Home | News |SABIC can adapt to new competition in petrochemicals
SABIC can adapt to new competition in petrochemicals
Updated: 2016-02-02 10:19 Source: Market Report Company share:

Saudi Basic Industries Corp. (SABIC) can adapt to any new petrochemicals supply entering the market from outside the kingdom, its acting CEO said recently, as Iran's release from sanctions promises increased global oil supply, reported Hydrocarbonprocessing.

Petrochemical companies in the kingdom have been struggling with falling oil prices, both as product prices are closely linked to crude and cheaper oil erodes the competitive advantage which Saudi manufacturers accrue over non-oil producing nations due to subsidized energy and feedstock.

SABIC, one of the world's largest petrochemicals companies, announced a 29.4% drop in fourth-quarter net profit last week, its sixth straight quarterly profit decline.

The pressures could be amplified further with Iranian oil being reintroduced to global markets: the prospect has already driven crude prices to a 12-year low.

Yousef Abdullah al-Benyan told a news conference in Riyadh that he wasn't sure about the state of Iran's petrochemicals industry but, in general, it takes between three and five years to come to market, start producing and then ramp up production.

"A competitive environment is always healthy and this is the way we love to play, so we have no concerns at all," Benyan said when asked if Iran's re-entry threatened market oversupply.

Supply questions are coming as concerns about a global economic slowdown, especially in China, are threatening demand.

Benyan said SABIC's sales in China had not been impacted so far, although diminished growth in emerging Asian and mature European economies had stunted demand. The value of sales in the fourth quarter of 2015 dropped 21.9% year on year to 34.16 billion riyals.

Going forward, it was looking to expand its business in Africa as well as Southeast Asian markets including Vietnam, Indonesia and Malaysia, where it was looking to switch from being a seller of petrochemicals in the region to a manufacturer.

To weather the difficult market conditions, SABIC has been implementing a cost-cutting strategy and Benyan said the company hoped to see the benefits in the coming year.


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