Gulf chemical firms due to write down $67.5m in Q1 2009

PRICE CHECK: Minor inventory write downs are predicted for the first quarter of 2009. (Getty Images)

Inventory write downs by Saudi Basic Industries Corporation (SABIC) and Industries Qatar valued in total at $67.5m are likely in the first quarter of 2009 as the prices of steel, billets and iron ore continue to slide, according to a research note by HSBC.

A sharp and sudden fall in product prices in the second half of 2008 left most chemical companies with high-cost inventory that needed to be written down to replacement-value levels, the bank said.

But the first quarter 2009 results would see minor inventory write downs, as most of the costly inventory should have been consumed and replaced by low-cost inventory. it added.

It expected Industries Qatar, Qatar’s largest traded company, to write down about $27.5m in inventory-related charges in the first quarter following $90.6m in the fourth quarter of 2008.

Meanwhile, SABIC, the largest non-oil company in the Middle East, was expected to take a further write-down of around $40m, HSBC said.

Steel prices have fallen by an average of three percent in the past three months, with the price of billets dropping 10 percent and iron ore slipping five percent, according to HSBC.

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