SABIC expects continued pressure on its product prices, margins on higher supply

Saudi Basic Industries Corp. (SABIC) expected that the new capacities in key products lines that pressured its product prices and margins in 2019 will continue to impact 2020 earnings.

Sales volumes increased by 5% in the fourth quarter of 2019 compared to the same period a year before, compensating for lower petrochemical prices, SABIC said in its Q4 2019 financial results report.

On a sequential basis, sales revenue fell 8% in Q4 2019, the report added.

In the Chemical’s business unit, mono ethylene glycol (MEG) industry was supported by tighter than expected supply conditions due to a decrease in inventory, especially in Asia, coupled with certain outages. Methanol prices were negatively impacted by subdued demand from the key end markets and ample supply especially in Asia and Europe but prices benefited from unplanned shutdowns in the US. There was a seasonal decline in methyl tert-butyl ether (MTBE) demand with the end of the driving season.

For the Polyethylene’s business unit, prices were negatively impacted by lower seasonal demand, new capacities coming on-stream in the fourth quarter of 2019 and concerns of additional new supply starting up in 2020.

Polypropylene (PP) prices decreased due to a reduction in monomer prices and slowing demand growth.