SABIC cites 'urgent pressure' to cut costs in petchems

SABIC cited "urgent pressure" to reduce costs in facing petrochemicals markets challenges after reporting the closure of its UK olefins plant in June.

"Certainly, there is an urgent pressure to lower costs amid the challenges of the petrochemicals market," Salah al-Hareky, EVP for corporate finance, said during an Aug. 3 press conference after reporting Q2 earnings.

Closing of the Teeside, UK, cracker resulted in Riyal 3.78 billion ($1 billion) in charges and provisions, the company said. "This action is in line with the company portfolio review to reduce cost and improve profitability," it said in an earnings statement to the Saudi stock exchange earlier in the day.

When asked about SABIC's revision of its European asset portfolio, CEO Abdulrahman al-Fageeh specified no other closures 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.

SABIC set its capex for the year to a range of $3 billion to $3.5 billion as the company develops its Fujian petrochemical complex in China scheduled for initial operations by Q2 of 2026, as well as the Jubail Petrokemya MTBE plant set to be completed in Q3 of this year. Development for both projects is as planned in terms of schedule and budget, according to the company.

All end uses for petrochemicals were reported stable in Q2, similarly to previous quarters, excluding its industrial, electrical/electronics and hygiene/health care sectors which "improved" from the previous quarter, the company said.

In 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.