MOSCOW (MRC) -- SABIC, the Middle East's biggest petrochemical maker which is being acquired by Saudi Aramco, expects a fall in prices and profit margins in 2020 amid a global oversupply after it swung to a loss in the fourth quarter, reported S&P Global.
"New additional supply [is} expected to keep product prices and margins under pressure in 2020," SABIC said in the presentation posted on Wednesday on the website of the Saudi Stock exchange, known as Tadawul.
The company reported a loss of Riyal 720 million (USD192 million) in Q4 2019 due to a drop in average selling prices and impairment provision for a subsidiary.
SABIC's Q4 volumes were unchanged, but prices fell 19% from a year earlier period, the company said in the presentation. It didn't give production figures.
The company, which posted Riyal 3.22 billion profit in Q4 2018, set aside Riyal 1.3 billion for the impairment of subsidiary Ibn Rushd, it said on Wednesday in a statement to Tadawul.
Saudi Aramco, the world's biggest oil producing company, is in the midst of merging with SABIC after acquiring a 70% stake in the petrochemical producer for USD69 billion in 2019.
Both Saudi Aramco and SABIC are boosting their petrochemical footprint and inking agreements within and outside the Gulf state to gain access to feedstock and get closer to their customers.
SABIC in October said it signed an initial non-binding memorandum of understanding with Russian Direct Investment Fund, the country's sovereign wealth fund, and ESN Group to evaluate building and operating a methanol plant with a capacity of up to 2 million mt/year in the Amur region of Russia.
ExxonMobil and SABIC are also going ahead with the development of a newbuild petrochemical complex in Texas, after having received all necessary permits and approvals.
However, European specialty chemicals producer Clariant and SABIC, its top shareholder, said in July they have temporarily suspended talks to form a joint venture due to current "unfavorable" market conditions.
SABIC in September 2018 signed a memorandum of understanding to combine SABIC's specialties business with Clariant's additives and high value masterbatch offerings. SABIC's third quarter profit had plunged 86% year on year to Riyal 830 million due to a Riyal 1.5 billion impairment provision for its 24.99% stake in the Swiss firm.
As MRC wrote before, SABIC took off-stream its SABIC Olefins 4 cracker owing to technical issues on May 10, 2019. Further details on duration of the shutdown could not be ascertained. Located in beek, the Netherlands, the cracker has an ethylene production capacity of 690,000 mt/year and a propylene production capacity of 360,000 mt/year.
Besides, in the first week of September 2019, SABIC Europe, an affiliate of SABIC, started maintenance work at its cracker No.3 at Geleen site in the Netherlands. The planned maintenance is slated to last around 2 months. The company operates two steam crackers in Geleen which are capable of producing 1,250,000 tons/year of ethylene and 675,000 tons/year of propylene in total.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the worldпїЅs market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC