Oil prices threaten Saudi petrochemicals: Riyad Capital

Riyad Capital reduced the target prices for shares of several petrochemical companies listed under its coverage.
 

The firm projected that tumbling oil prices will negatively impact petrochemical prices, as well as margins in the coming year.

Riyad Capital said it has concerns that petrochemical supplies will continue to exceed demand in 2016 and 2017 as many Ethylene projects begin to launch production in the United States.

The U.S.  announced that its Ethylene production will increase 20 percent by an additional 11.3 million tons in 2017, while China said it will raise its production by six million tons in 2016 and 2017.

Saudi Arabia-based Sadara— a joint venture between Saudi Aramco and The Dow Jones Chemical Company— will also start production in 2016 and raise production by 2.8 million tons.

SIPCHEM and SAHARA’s sales will grow based on the each company’s expansion plans, Riyad Capital said.

The firm also predicted that Saudi Kayan Petrochemical Company will be the worst hit as its net income is expected to turn into a loss in 2015 due to tumbling oil prices.