SABIC cites 'structurally challenged' petrochemical market as it restructures portfolio

Saudi petrochemicals giant SABIC on Aug. 4 said it was cutting its capex spending and looking for further divestments to optimize its portfolio amid a weak global economic outlook and overcapacity in the sector, as it reported lackluster earnings for Q2.

In reporting its third straight quarterly loss, SABIC reduced its capex guidance by $500 million to a range of $3 billion and $3.5 billion for 2025. Global GDP grew just 2.5% in the second quarter year-on-year, with tariff and trade uncertainties weighing on the near-term outlook, CEO Abdulrahman al-Fageeh said in presenting the company's latest earnings.

"The petrochemical industry continues to be structurally challenged, including prolonged global overcapacity and sustained margin pressure," Fageeh told analysts on an earnings call. "In response, we have accelerated our portfolio optimization actions in establishing a dedicated project management office under direct board oversight to drive execution with discipline and urgency."

In June, SABIC shuttered its UK-based olefins cracker as it sought to reduce costs and improve profitability. Closing of the Teeside, UK, cracker resulted in Riyal 3.78 billion ($1 billion) in charges and provisions, the company said.

SABIC also announced on July 9 a strategic evaluation and initial public offering of its National Industrial Gases subsidiary.

"The work on the portfolio optimization is still ongoing," Salah al-Hareky, SABIC's executive vice president for corporate finance, said on the call, outlining the company's steps to carve out its assets in Europe and the US to improve and transform the business as well as "explore opportunities for market consolidation through partial or full exit in the future."

A day earlier, in a press conference to discuss SABIC's earnings, Hareky told reporters that SABIC felt "urgent pressure" to lower costs in the current petrochemicals market.

When asked about SABIC's revision of its European asset portfolio, Fageeh said at the press briefing that there were no further closures planned in the near future.

Q2 revenue fell 0.4% from the same period a year earlier to Riyal 35.57 billion ($9.48 billion), the company said, citing higher sales volume and lower average selling prices.

Upcoming projects

SABIC said its Q2 petrochemical sales volume, including chemicals, polymers and specialties, increased 3% while average prices fell 3% on a quarterly basis. Similarly, sales volumes for agri-nutrients such as phosphate, ammonia and urea rose 2% and average prices were 1% higher, the company reported.

In chemicals, methanol prices retreated due to high inventories and oversupply while MTBE prices saw a decline, as well, due to low demand and high supply, the company said.

Polymers, including polypropylene, polyethylene and polycarbonate, prices declined "due to weak demand caused by global uncertainty and ample supply," SABIC said.

SABIC's Jubail-based MTBE project at our Petrokemya "is more than 95% complete," Fageeh said on the analyst call.

"Commissioning will occur during the third quarter of this year with the ramp up of on-spec production expected in the last quarter of this year," he added. The plant will have a planned capacity of 1 million mt/year.

As for SABIC's Fujian petrochemicals project in China, progress remains within schedule and allocated budget, according to the company.

In response to questions concerning plant closures and high inventory levels at Chinese facilities potentially impacting revenue contributions, SABIC reported no threat to its position in such markets.

"A lot of people in the industry nowadays with this overcapacity are looking towards optimization, but I don't think we have seen any real closures other than what has been announced in the media," Hareky said.

Petrochemicals growth

Sales increased 3% quarter over quarter in the petrochemicals segment, which covers SABIC's chemicals and polymers businesses.

"This increase was mainly driven by higher sales of oxygenates and glycols," according to the company.

In the chemicals business, monoethylene glycol prices declined in Q2 as demand from the polyester sector retreated, while methanol prices were lower amid market oversupply and high inventories. Methyl tert-butyl ether prices declined during the second quarter due to lower-than-expected seasonal demand and significant supply.

In polymers, polyethylene prices were lower on weaker naphtha and bearish sentiment. Polypropylene prices declined in Q2 due to weak demand caused by global uncertainty and ample supply, while polycarbonate prices continued to decline due to weak demand and global oversupply.

"We successfully introduced 58 new products for customers in Q2 2025," Fageeh said, highlighting the company's focus on customer-centric innovation despite market headwinds.

Platts, part of S&P Global Energy, assessed the FOB Saudi Arabia polypropylene raffia spot price at $900/mt Aug. 4, unchanged from Aug. 1.