Access to the low priced oil-based raw materials and the rising demand for fertilizers has augmented the world largest chemical maker, Sabic's Q2 profit by 17%. The company H1 profits rose by 13% from 14.5 bln riyals from the 12.8 bln riyals in H1 of 2007. Saudi Arabian Fertilizer Co, Sabic's agrochemical's unit showed the most notable twice the increase in the quarterly profits in light of the rising demand. Due to Sabic's (which is 70% govt owned) access to discounted feedstocks from the biggest reserves of oil and gas, it is on an expansion spree in China and other Asian regions unabashedly outplaying the North American and European players which face uphill prices for the same raw stock. Sabic pays Saudi Aramco, the world's largest government- owned oil supplier, 75 cents per mln British thermal unit for natural gas, compared with current spot Henry Hub natural gas prices above US$10.69 that some competitors must pay.
As per a senior official, Sabic is certainly planning to cash in on the demand of plastics and other chemical products required for manufacturing of auto-parts, packaging and plastics in China. By 2015, China will account for 25% of the global demand for chemicals. Looking at such rising opportunities in China, Sabic and China Petroleum & Chemical Corp. agreed in January to a 50-50 venture to build a US$1.7 bln Tianjin plant having a production capacity of 4 mln tpa of petrochemicals when operational by Q3 end of 2009.
Apart from expansion, diversification is also integral for Sabic. With securing contracts for providing the thermoplastics sheets for Euro 2008 and a US$11.6 bln acquisition of GE Plastics in August enabled the company to branch out into manufacturing thermoplastics sheets, resins and the Lexan brand which are higher value products less dependent on basic chemicals like ethylene.