The petrochemical prices dropped in June and early July driven by oil price weakness and return of supply after completion of seasonal cracker shutdown in Asia and the GCC region. Most commodity chemical prices are trading lower than May-June 2015 highs with ethylene down (-15 percent), HDPE (-6 percent), LDPE (-10 percent), LLDPE (-9 percent), polypropylene (-10 percent), benzene (-10 percent), styrene (-18 percent), polystyrene (-6 percent) and ethylene glycol (-14 percent), Investment Bank SICO’s monthly round up on GCC petrochemical sector said.
The Saudi Petrochemicals Sector Index (SASEPETR) declined 6.2 percent during June, performing in line with the broader Tadawul benchmark, which also fell 6.2 percent. KSA petrochemical stocks broadly ended the month on a negative note. Among the large-cap names SABIC (-7.7 percent), Tasnee (-18.2 percent), Saudi Kayan (-8.3 percent) and PetroRabigh (-10.3 percent) underperformed the index while SAFCO (-1.2 percent) and Yansab (+3.5 percent) outperformed. In the mid-caps space, Sahara Petrochemicals (-8.5 percent), Petrochem (-7.8 percent) and Alujain (-9.3 percent) underperformed the index.
In Qatar, Industries Qatar gained 5 percent, outperforming the broader Qatar Exchange (QE) index by 3.7 percent.
Saudi Arabia’s Sipchem signed an agreement to acquire the equities investment of Ikarus Petroleum Industries Company (Kuwaiti Company) in two of its Sipchem affiliates, namely, International Acetyl Company (11 percent) and International Vinyl Acetate Company (11 percent), for an estimated value of $100.2m. The purchase would be conditional on obtaining the approval of the concerned authorities and other parties. The companies operate a plant for a production of Acetic Acid and Acetic Anhydride and Vinyl Acetate Monomer; both the plants are located in Jubail Industrial City.
The deal is expected to close in Q3, 15 and Sipchem intends to finance the acquisition through its own resources in addition to Islamic Financing Facilities. Sipchem currently owns 76 percent equity in each of International Acetyl Company and International Vinyl Acetate Company. After the completion of this transaction, Sipchem equity in both companies would increase to 87 percent. Saudi Arabia’s Tasnee delayed commercial start-up at ilmenite plant to 2H16. Commercial production at ilmenite smelting plant has been delayed until 2H16. due to changes required to resolve technical issues. Tasnee said it would be difficult to determine the financial impact of the delays at the plant.
SABIC signed 50-50 JV with SK Global Chemical for the production of high performance polyethylene SABIC completed all the requirements to form the JV Company with a total investment of $ 640mn for the technology and the plant construction,which will be finaced through a mix of self-funding and commercial loans.
Saudi’s Sadara Chemical is to hold an initial public offering next year without a premium.
Saudi Kayan pushed back maintenance work at some of its plants by six months to March next year. The shutdown will have a negative earnings impact of SAR 340mn, as per company estimates. The earlier announced shutdown schedule for 4Q15 was: Ethylene glycol/ ethylene oxide (EG/EO) plant for 60 days starting from 01 Oct 2015, polycarbonate unit for 75 days, amines unit for 65 days. The change in schedule will lead to upward revision of 2015 estimates and downward revision in 2016 estimates. The Peninsula
