Sabic looks at US Investments as Europe slowdown hurts sales

22-Jul-13

Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker by market value, is studying investment opportunities in the U.S. as the economic slowdown in Europe and China hurt its second-quarter sales. “It is very important that Sabic is not left out from investments in the U.S. as it is a huge market in terms of the presence of shale gas and also proximity to other markets,” Chief Executive Officer Mohamed Al-Mady told reporters in Riyadh yesterday. “We are studying opportunities in the U.S. to expand Sabic’s presence in the chemical and polymer businesses.” Sabic, would be joining companies including Dow Chemical Co. and Exxon Mobil Corp. in seeking to take advantage of the U.S. shale boom that has helped drive down natural-gas prices. Cheap gas is doubly advantageous to chemical makers because it’s used as a raw material and to power factories.U.S. producers would be more competitive in commodity chemical exports to Asia if wet shale costs remained below $6.5 per million British thermal units and Brent stayed above $100 a barrel, said Digvijay Singh, a Dubai-based analyst at VTB Capital. “Sabic is just trying to capture export market share that way -- to try and become a lower-cost producer,” he said. Sabic’s plan for U.S. investments comes as the economic slowdown in Europe and China ebbed demand from clients and affected earnings at the company and its affiliates. Second-quarter profit at the Riyadh-based company climbed 14%, missing analysts estimates. Sales declined to 45 billion riyals from 46.5 billion riyals. The euro-area economy is forecast to have stagnated in the second quarter after a contraction in the first three months of the year that extended its recession into a sixth quarter. China’s economy grew 7.5% in the second quarter from a year earlier, down from 7.7% in the first three months, and is at risk of the weakest expansion in 23 years. “Glycol production was the most affected by the economic slowdown as it is the number one product we export to China and East Asia,” Al-Mady said. He said China, where it has an ethylene and polycarbonate venture with China Petroleum and Chemical Corp., will continue to be Sabic’s biggest market.