Skip to content Skip to Search
Skip navigation

Petrochemicals producer in $40m blow

Sabic said better conditions in its agriculture and automotive businesses are supporting its margins Reuters/Faisal Al Nasser
Sabic remains steadfast in pursuing future growth despite short-term market challenges, said CEO Abdulrahman Al-Fageeh
  • Yansab reports ‘technical upset’
  • Stoppage could last into September
  • Profits plunge across sector

A major Saudi Arabian petrochemicals company has announced a temporary shutdown at some of its plants which is likely to cost it SAR150 million ($40 million).

Yanbu National Petrochemical Company (Yansab) said a “technical upset” forced the shutdown on August 14 and is likely to continue into early September.

“The work is in progress to overcome this issue and carry out the necessary repairs,” the company, which is 51 percent owned by Saudi Basic Industries Corporation (Sabic), said in a filing to the Saudi Stock Exchange where it is listed.

“It is expected that this shutdown will continue for another 11 days and the expected financial impact of this shutdown is estimated at 150 million Saudi riyals,” the company added.

It is a difficult time for Saudi Arabia’s petrochemicals producers, who reported plunging profits in the second quarter. They are likely to face further struggles due to weak demand, oversupply and high costs.

Yansab saw its net profit in Q2 slump to SAR27 million versus SAR288 million a year earlier on revenue of SAR1.3 billion, a 36 percent year-on-year decrease. 

It said the drop was attributable to lower average sales prices and lower production and sales.

Average sales prices in the second quarter declined by 11 percent compared to the prior three months while sales prices fell by 30 percent and volumes dropped by 8 percent compared to the same quarter of 2022. 

In the first six months of 2023, Yansab reported a loss of SAR342 million compared to a SAR571 million profit in H1 2022 on the back of a preventative maintenance programme, which is estimated to have resulted in a SAR385 million financial impact.

Its share price fell nearly 3 percent in early trading on Tuesday to under SAR43, well down on its 52-week high of SAR52.5 but higher than its annual low of SAR38.

Analysts told AGBI last week that there seems little scope for the industry to rebound until at least 2024 as petrochemicals prices continued to fall in early Q3.

Sabic, the kingdom’s top petrochemicals maker and majority-owner of Yansab, reported an 85 percent year-on-year decline in second quarter net profit and warned that margins will “be continuously under pressure” in the third quarter.

Industry-wide, petrochemical margins have tumbled to two-decade lows.

Huge oversupply in China’s once-buoyant real estate sector, which was a major consumer of petrochemicals, suggests demand for petrochemicals from the world’s No 2 economy will remain subdued.

The correlation between China’s GDP expansion and petrochemicals demand growth has been strong over time, according to EFG Hermes.

China began increasing its own petrochemicals capacity significantly from 2021, with 2023 likely to be the peak in terms of its annual capacity expansion.

Global demand for ethylene and propylene is forecast to surge 29 percent from 2023 to 426.8 million metric tons by 2030. 

Capacity is expected to jump 25 percent from 2023 to 485.9 million metric tons by 2030, according to research firm Wood Mackenzie.

New capacity in China is expected to make up more than half of that growth, according to the International Energy Agency.

Latest articles

An artist's impression of part of the Diriyah Square development

Diriyah Square planned for historic Riyadh district

A public space featuring 400 retail outlets and 100 restaurants and cafes is planned for the historic Riyadh district of Diriyah. Diriyah Square will be announced next week at the World Retail Congress in Paris and aims to attract a combination of international retail brands and local artisans.  Diriyah Gate Development Authority group CEO Jerry […]

Nature, Undersea cables account for as much as 90 percent of Europe-Asia telecommunications, Water

Iraq and Kuwait team up for European telecom corridor

Iraq’s Informatics and Telecommunication Public Company, a division of the Ministry of Communications, has signed an agreement with Kuwait’s Zajil Telecom to create a telecommunications corridor from the Gulf region to Europe, transiting through Iraq and Turkey. The new route will pass through Iraqi sea and land ports. Iraq’s minister of communications Hayam Al-Yasiri said […]

Passengers at Beijing Capital International Airport. Air China will fly from the airport to Riyadh three times a week.

Third Chinese airline to launch flights to Saudi Arabia

Air China is set to begin flights to Riyadh in May, becoming the third Chinese airline to establish a route to Saudi Arabia. It joins China Southern and Eastern Airlines in connecting China with the kingdom.  Air China’s Airbus A330-300 will serve the Beijing-Riyadh route three times a week. The expansion in capacity between the […]

Highway traffic in California. Opec said the upcoming 'driving season' in the US will provide the usual additional demand for fuel

Opec stands by predictions for oil demand growth

Opec predicts robust fuel use this summer and has stuck to last month’s forecast of relatively strong growth in oil demand in 2024 and 2025. The oil producers’ organisation predicted in its monthly report that global demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. […]