SABIC has 'guarded optimism' on price recovery

Demand in Europe slow, but business in India, China and Far East 'very good'.
SABIC has 'guarded optimism' on price recovery
By Ulf Laessing
Sun 06 Dec 2009 08:33 PM


Saudi Basic Industries Corp (SABIC)

, the world's biggest petrochemicals company by market value, has "guarded optimism" that prices will recover in U.S., China and Europe markets, its chief executive said on Sunday.

Demand in Europe was still sluggish but business in the Far East, including China, was much better for
SABIC

and business in India was also very good, Mohamed al-Mady said in an interview with Reuters.

"Our estimate is that 2010 is going to be a positive year," Mady said when asked whether petrochemical prices would recover. "Judging from the last six months, we have guarded optimism."

Mady declined to give a forecast for fourth-quarter profit, saying only: "We are very optimistic that with our strong foundation that
SABIC

has, and the situation has not deteriorated (so) we stand to benefit in any increase in prices."

Net profit at
SABIC

-- a yardstick for the performance of rivals such as U.S. Dow Chemical and Germany's BASF-- halved in the third quarter to 3.6 billion riyals ($960 million) but doubled relative to the second quarter.

In China,
SABIC

would increase its investment after securing government approval for a $3 billion joint-venture plant with Sinopec in the region of Tianjin as one plant was not sufficient, he said.

"You are talking about a huge market that is just beginning to grow. In China the growth hasn't happened in value-added products. It will need basic materials, it will lot of downstream products, sophisticated products," Mady said.

The joint venture plant will have an annual production capacity of 3.2 million tonnes,
SABIC

said in July.

SABIC

is considering new plants to boost total production to 130 million tonnes of petrochemicals by 2020, up from 56 million tonnes in 2008, which would require more plants, he said.

"We still have the kingdom of Saudi Arabia to grow our business, China and the Far East. In these places, we are concentrating for the moment," Mady said.

He said he saw no impact of the debt crisis in Dubai on
SABIC

's ability to raise funds for its projects from banks. "We're in the energy business, and the energy business is strong," he said.

Funding has been secured the joint venture with Sinopec, he added.

He said rising oil prices should improve profitability.

SABIC

usually does better in terms of profitability than rivals because it purchases feedstock at lower prices, analysts say.

In addition to petrochemicals,
SABIC

owns Hadeed, Saudi Arabia's largest steel maker.

(Reuters)

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