The petrochemicals sector has been squeezed in the past few months, even while the longer-term prospects for the industry in the region look positive.
Companies such as Sabic are being hit by a combination of lower oil prices as well as lower demand and thus tighter margins.
Sabic has long-term contracts for its feedstocks from Saudi Aramco. So the decline in oil prices will not have affected its cost base. But as the naphtha-linked sales of its end products decline, it will take time to adjust and recover margins, analysts say.
Projects have also been hit by the downturn, one in Saudi Arabia last October and another in Qatar last week.
But the news has not been all bad. In the UAE, petrochemicals trade via the Jebel Ali Free Trade Zone experienced 20 per cent growth in the two years to 2014, when annual petchem trade reached US$14 billion, according to Jafza.
And according to a recent report by the consulting firm Frost & Sullivan, the Middle East’s chemical industry is projected to outpace the industry’s global growth through the rest of this decade, with petrochemicals expected to record annual growth of 8.3 per cent and end up with 75 per cent of the market.
amcauley@thenational.ae
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