Challenges in petchem sector still loom: Advanced CEO

Fahad Al Matrafi, CEO of Advanced Petrochemical Co.

Fahad Al Matrafi, CEO of Advanced Petrochemical Co., said challenges are still lingering in the petrochemical sector, leading to lower profit margins. This is mainly due to increased freight and propane prices in Q3 2024, compared to the previous quarter and the same period last year.

In an interview with Argaam, he explained that propane prices typically rise in winter, when demand for propane as a winter heating fuel grows.

Al Matrafi noted that Chinese government stimulus packages could support China’s economy and stabilize petrochemical product prices, although the full impact may take time to materialize.

On Q3 2024 results, the CEO said Advanced’s profit turned higher due to a 1% rise in sales volumes compared to the previous quarter. This is in addition to a SAR 3 million reduction in SK Advanced Co. investment losses.

He added that key markets for the third quarter of this year included Turkey, Europe, Latin America, India, and Africa. The company focuses on markets offering the highest returns, with China remaining a secondary market due to low product prices.

Net sale prices dropped 2% quarter-on-quarter (QoQ) in Q3 2024. This was due to a 40% increase in freight costs, Al Matrafi said.

The uptick in freight costs was driven by geopolitical conflicts, which caused longer shipping routes and tariffs. Shipping times to Europe and Turkey prolonged from one to two months.

Additionally, a tax ban on Chinese electric vehicle (EV) exports in August led to a surge in exports ahead of the taxing deadline, therefore disrupting supply chains in terms of shipping routes and container space.

He noted that shipping costs have recently peaked and are now gradually declining. Al Matrafi expects improvement to show in Q4 2024, which will help boost profit margins once costs stabilize near the 2023 levels.

He added that the start of commercial operations of a gas pipeline, in partnership with Jubail United Petrochemical Co (JUPC), aims to capture associated gas that was previously flared. This shall support the adoption of a carbon circular economy by converting gas into value-added chemicals, thus enhancing operational efficiency and environmental performance.

Al Matrafi emphasized that the project reflects Advanced's commitment to environmental, innovative and social governance, alongside industrial integration in Jubail Industrial City.

The company, according to the CEO, constantly strives to enhance its financial and environmental performance by exploring collaboration and achieving sustainable growth.

Advanced saw an 80% profit drop to SAR 29 million in the first nine months of 2024, compared to the same period last year. The third-quarter bottom line reached SAR 46 million, slightly higher than both the previous quarter and the same period last year, according to Argaam's data.