Oil & Gas

Petro Rabigh losses hit $1.7bn in fresh blow to chemicals sector

January 17, 2024, 12:42 PM

A Sabic facility in Jubail. Margins have tumbled for Saudi petrochemicals producers

Losses 38.4% of share capital
‘Challenging market conditions’
Weak demand in 2023

Petro Rabigh, one of the largest petrochemicals producers in Saudi Arabia, has revealed that its losses now exceed SAR6.4 billion ($1.7 billion).

The listed company announced in a filing to the Saudi stock exchange that losses had reached 38.4 percent of its share capital.

The business, which is part-owned by state oil giant Saudi Aramco, cited “challenging market conditions” that are adversely affecting margins for refined and petrochemicals products.

Its losses have increased by SAR1.4 billion since September 30, 2023, when they were just under 30 percent of share capital.

Petro Rabigh’s share price was down more than 3 percent in early trading on Wednesday.

The market challenges are set to continue in 2024, according to S&P Global, as weak economic growth and oversupply weigh on chemical producers’ prospects.

S&P commodities analysts said demand for most petrochemicals was weaker than expected in 2023.

High inflation, interest rates and geopolitical tensions also present risks to growth, they added.

“Producers are seeing hopeful signs that the demand is starting to stabilise but are hesitant to predict the pace of any recovery,” they said.

Petro Rabigh was one of several Saudi petrochemicals producers to report plunging profits last year.

It posted a SAR3.3 billion net loss for the first nine months of 2023, compared to a net profit of SAR696 million for the year-earlier period.

Sabic, the world’s seventh-largest petrochemicals maker by annual sales, made a net loss of SAR2.9 billion in the three months to September 30, compared to a profit of SAR1.8 billion in Q3 2022.

Its CEO, Abdulrahman Al Fageeh, is expecting the industry to have a “difficult” 2024, he said in December.

Prices for petrochemicals products usually track those of oil, but they have been forced down by oversupply and muted demand from major buyers such as China. Margins among Saudi Arabia’s manufacturers have tumbled to 20-year lows.

The pressure on Saudi petrochemicals firms increased this month when Aramco raised prices on feedstock and fuel products.

Robert Stier, senior lead for global petrochemical analytics at S&P Global Commodity Insights, said plastics demand had been lower than expected.

“There is no realistic demand scenario that makes 2024 plastics margins sustainably bullish,” he said.

The gloomy outlook is likely to weigh on the Saudi stock market, in which petrochemicals are a heavyweight sector.