Published on September 19, 2014
In the next couple of months the performance of the Saudi petrochemical sector is expected to remain volatile owing to lack of catalysts and due to near-term headwinds the country is currently trading at a discount, According to the researched report. Additionally, over the mid-term the report on Saudi Petrochemical sector tends to remain positive and with the upcoming of several plants the Saudi petrochemical industry look forward for earnings to improve as they have hoisted their targets price for SABIC to SR137.5. Moreover as per the researched report the petrochemical industry of Saudi tends to linger overweight on SAFCO, NIC and SABIC next to the stock levels.
According to the researched report, in the Q1 of 2014 the prices of petrochemical had by and large witnessed a roller-coaster ride with hike in prices on account of number of shutdowns in the different parts of the world along with number of plants restarted post turnaround in the Q2 of 2014. The Q1 of 2014 was somewhat different from the Q1 of 2013, as the prices in the Q1 of 2014 had either turn down or elevated lower-than-expected affecting revenues such as prices of Ethylene plunged down by 0.3% and at the same time as the prices of Propylene inched higher by 6.8%. However in the Q1 of 2013 the prices of basic Olefins that are Ethylene and Propylene were up by 13.8% and 10.7%.
As result the on account of lower shutdowns globally the prices of several derivatives and intermediaries had dropped down or was unable to reach at the same height as it did in the first quarter of 2013, hence due to this reason the performance of most of the Saudi producers were affected. Furthermore as per the report, in the second quarter of 2014 several petrochemical manufacturers of Saudi had conventionally witnessed a weak quarter and do not look forward any changed in this trend in 2014, in particular with manufacturing in China enduring bleak.
According to the industry expert, as developed countries show more reliable growth in consumption, along with an improve of industrial activities, the experts believe the prices of the products to gather momentum in the second half of 2014, additionally, due to higher crude prices the prices of Naphtha remained at higher levels and as compared to the global peers the market players of Saudi will prolong to garner healthy margins.
Over next couple of years the industry experts believe that it will provide earnings buildup, as several petrochemical companies based in Saudi have still under developed major project. As per the experts over the next few quarter these under development major projects will commence production, which consist of elastomer plant of SABIC, titanium & SAPCO projects of NIC and fifth unit SAFCO-V among others of SAFCO. Hence over the coming quarters the earning performance of these major petrochemical industries will be boosted, adding to the volumes to these projects.
