Strategy Note /
Saudi Arabia

Saudi Arabia: SNB Capital Petrochemical Tracker | March 2023

  • The Saudi petrochemical companies reported a weak set of Q4 22 results

  • slow global demand and additional new capacities for main products are expected to put pressure on margins in H1 23

  • Urea continued its negative momentum in February, declining 19.1% mom (-51.8% yoy) to US$364

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
13 March 2023
Published bySNB Capital

The Saudi petrochemical companies reported a weak set of Q4 22 results following weak global demand, low prices and high production cost. Looking into 2023f, the outlook remains uncertain in H1 23 with improvement expected toward H2 23 as China demand picks-up. In Feb 23, average HDPE and PP prices increased by 4.4% mom and 4.2% mom, but declined 16.4% yoy and 16.7% yoy, respectively. Urea prices continued its negative momentum, declining by 19.1% mom to reach US$364.

  • According to SABIC, slow global demand and additional new capacities for main products are expected to put pressure on margins in H1 23. For Q1 23, demand is expected to slightly improve mainly in the consumer and electronic industries.

  • As per BASF, the global chemical production grew by 2.2% in 2022 (vs 6.1% in 2021). In 2023f, BASF expects a moderation in global chemical production growth to 2.0%, slightly higher than the expected GDP growth of 1.6% due to 1) high uncertainty levels and 2) the absence of strong demand drivers. According to LyondellBasell, challenging market conditions are expected to persist in H1 23. Accordingly, LyondellBasell will align production with global demand trends and expects Q1 23 utilization rates of c80%.

  • Urea continued its negative momentum in February, declining 19.1% mom (-51.8% yoy) to US$364. This is broadly in-line with the 10-year average of US$350. The decline is mainly due to growing supply and low demand.

  • The Saudi petrochemical companies reported a weak set of Q4 22 results. Net income declined 82.7% yoy and 57.8% qoq to SAR1.75bn. The decline is mainly due to low prices and high feedstock and production costs. SABIC reported a net income of SAR293mn (-94.1% yoy), Yansab losses continued while Advanced reported its first losses on record.

  • In Feb 23, average LDPE and LLDPE prices increased 3.5% mom (-28.9% yoy) and 2.5% mom (-17.1% yoy), respectively. Benzene increased 3.7% mom (-9.5% yoy) while methanol increased 2.8% mom (-10.3% yoy). HDPE-propane and PP-propane spreads decreased by 40.7% mom (-48.4% yoy) and 43.8% mom (-51.1%yoy), respectively.