According to the last financial study released by Al-Rajhi Capital, the growth forecast of the Saudi Arabian petrochemical companies is healthy, despite lingering uncertainties in the global economies. Because of their diversified activities, companies like SABIC or TASNEE should not be impacted by the feedstock costs increase in 2013 as could be the “pure-play producers”.
Even if the gas price should increase in 2013 from $0.75 per million btu to $1.25 in Saudi Arabia, the local petrochemicals producers would continue to benefit from the lowest costs of production. By comparison with the rest of the World, this gas price is less than half of the actual level in North America at $2.57 per million btu and less than a thenth than in Europe ($11.5 per million btu) or in Japan ($16 per million btu).
In an ethylene industry where the feedstock represents 80% of the costs, the Saudi Arabian petrochemicals companies should be the last ones to be affected in case of weaker demand on the next two quarters.
