Page 17 - DMEA Week 34

DMEA PETROCHEMICALS DMEA

Fitch affirms SABIC’s long-term

rating at A, outlook stable

SAUDI ARABIA FITCH, a ratings agency, affirmed Saudi Basic SABIC ranks among the world’s largest petro-
Industries Corporation (SABIC)’s long-term chemicals producers, with vertically integrated
The effect of the issuer default rating at A with stable outlook. operations, state-of-the-art world-scale facili-
pandemic on pricing Fitch observes that SABIC’s earnings were ties and a top market position for its products.
has been significant. put under pressure in late 2019 when massive It is a commoditised chemical company, but in
supply additions in petrochemicals overlapped a cost-leading position with access to low-cost
with global GDP deceleration and pressure in feedstock in Saudi Arabia underpinning strong
selected markets such as automotive. The pres- profitability levels and robust cash flow genera-
sure became unprecedented in the early second tion throughout the cycle ™
quarter 2020 alongside coronavirus (COVID-
19) spreading across Europe and later the Amer-
icas. While the pandemic has minimal impact
on SABIC’s operations or shipments, its effect on
petrochemical pricing is significant and tempo-
rarily dilutes SABIC’s historical cost advantage
from inexpensive domestic supplies of feed stock
over higher-cost but non-integrated players.
The ratings agency expects added petro-
chemical capacities to be absorbed by growing
demand before a recovery in price takes place
starting in 2021.

Qatar’s IQ snaps up QP’s stake in

fertiliser giant for $1bn

QATAR QATARI conglomerate Industries Qatar (IQ) In a statement, IQ said that having full control
has acquired Qatar Petroleum (QP)’s 25% stake of QAFCO would allow it to pick all the fertiliser
Qatar Petroleum will in Qatar Fertiliser Co. (QAFCO) for $1bn, mak- firm’s board members, and make all investment,
be able to use the ing it the sole owner of the world’s biggest sin- financing and dividend decisions on its own.
proceeds to fund its gle-site urea producer. “The purchase of QP’s stake in QAFCO is
LNG expansion plans. An extraordinary meeting of IQ’s sharehold- consistent with IQ’s strategy to build its presence
ers will be held to approve the deal, which is due and create value across the downstream sector,”
to be backdated to January 1 2020, the company IQ said.
said. The date of the meeting will be announced QP has not commented on the deal. But it will
in due course. be able to use the proceeds to fund its core LNG
QAFCO operates the complex in Mesaieed activities. The company, the world’s largest LNG
on the Persian Gulf, capable of producing 3.8mn producer, plans to expand its liquefaction capac-
tonnes per year of ammonia and 5.6mn tpy of ity from the current 77mn tpy to around 110mn
urea. Its products are exported all over the world. tpy by 2024-2025 and to 126mn tpy by towards
As part of the transaction, IQ’s board has also the end of the decade.
approved the purchase of QP’s 40% interest in Qatar QP enjoys very low LNG production costs
Melamine Co. (QMC), which operates the largest – the lowest in the world according to its own
melamine plant in the Middle East in Mesaieed with estimates. But like its peers, it has still reined
a production capacity of 600,000 tpy. in spending in response to the coronavirus
In addition, QAFCO has entered into a con- (COVID-19) pandemic and resulting market
tract with QP for gas supplies to both its produc- collapse. It intends to reduce capital and oper-
tion trains and those of QMC between August 1, ating expenses by 30% this year, its CEO Saad
2020 and December 31, 2035. Sherida al-Kaabi said in May. ™

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