Aramco's SABIC CEO warns about demand as Q2 prices slumped 27%

Dubai — Saudi Basic Industries Corp., the petrochemicals giant 70%-owned by Saudi Aramco, saw average petrochemical prices in the second quarter plunge by 27% year-on-year as it posted a third consecutive quarterly loss, CEO Yousef al-Benyan said Aug. 6.

Although there has been some improvement in performance during July and August, the CEO of the Middle East's biggest petrochemicals producer said the second half could be impacted by a second or third wave of COVID-19.

"Our view is that the second half is going to be more or less an average of the first half or a little bit better," Benyan said during a webcast press conference after reporting a Riyal 2.2 billion ($586.6 million) loss for the second quarter. "There is improvement on prices but current indications of a second or third wave of COVID-19 has put more pressure on demand. There is a potential implication on future demand driven by uncertainty we are seeing in the energy market."

Average petrochemical prices were 27% lower in the second quarter from the year-earlier period and down 18% from the first quarter, he said.

Saudi Aramco, the world's biggest oil producing company, is due to report earnings on Aug. 9.

SABIC's second-quarter loss compared with a Riyal 2.03 billion profit in the year-earlier period, it said in a statement to the Saudi stock exchange, or Tadawul. It posted a Riyal 1.05 billion loss in the first quarter.

The second-quarter loss was mainly attributable to lower average selling prices and sales along with impairments provisions, it said. Impairment provisions in the second quarter equaled Riyal 1.18 billion for investments related to Saudi Petrochemical Co. (Sadaf) and Saudi Methanol Co. (Arrazi), SABIC said.

The second-half outlook will be "subject to any impairment that needs to be taken in third quarter and fourth quarter, given the market conditions," the CEO said.

Aramco 'alignments'

SABIC and Aramco are looking at joint investments and could pursue other opportunities if it fits its strategy, Benyan said.

"Aramco being a major investor, we are looking at alignments on certain investment opportunities in major markets that will take place during the second half of this year," he said, without elaborating.

Aramco on June 17 said it completed the share acquisition of a 70% stake in SABIC from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyal 259.125 billion.

The acquisition of the SABIC stake is part of Aramco's strategy to build its downstream footprint by growing its integrated refining and petrochemicals capacity to add value across the hydrocarbon chain.

It specifically enhances Aramco's chemicals strategy by transforming Aramco into one of the major global petrochemicals players.

Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty product.