Sipchem's CEO says supply chains pose biggest challenge

He told Al-Arabiya TV that 80% of the company’s cargo ships are now sailing through the Cape of Good Hope, instead of the Red Sea.

Al-Saadoon also pointed out that, in addition to the Red Sea crisis-related impact on running costs, the increased redirection to the European shipping lanes hurt the overall shipping capacity. He stressed that this impact was not limited to shipping to Europe but also extended to Asia.

Sipchem expected no change to prices of methane and ethane feedstock, said the CEO, adding that prices of butane and propane feedstock follow international oil prices and saw a slight change of nearly 3% between the first and second quarters of this year.

Demand from China is still weak despite expectations of improvement, said the top executive, indicating that Sipchem has increased its sales in Europe, the Middle East, India and South Asia, with work ongoing to expand into new markets.

The company is also focusing on growth in new projects. The expansion strategy aims to double its production capacity in the next seven years, he added.

Sipchem is considered the largest producer of ethylene vinyl acetate in the Middle East, and the largest supplier to Europe. The expansion of the ethylene vinyl acetate plant, production at which is scheduled to begin in 2027, will help cut production costs and produce different grades of the same material, sold at prices higher than current ones, the CEO further stated.

He also said the company successfully slashed the debt-to-capital ratio in the past three years from 53% to 14% by the end of Q2 2024, which helped offset the impact of rising interest rates over the last two years.

According to data available to Argaam, Sipchem’s profit fell to SAR 303 million by the end of H1 2024, down 61% from SAR 783.3 million. The second-quarter profit amounted to SAR 121.5 million.