SABIC exits melamine, mothballs Al-Jubail unit

13 August 2008 12:58  [Source: ICIS news]

SINGAPORE (ICIS news)--Saudi Basic Industries Corp (SABIC) would exit the melamine market from the fourth quarter of this year due to poor economics, sources close to the market said on Wednesday.

The company said in a note dated 28 July to its customers that it would stop producing melamine at the end of this month but would supply customers to the end of the third quarter of 2008.

The Saudi’s fertilizer subsidiary Saudi Arabian Fertiliser Co (Safco) would shut its 20,000 tonne/year unit at Al-Jubail.

SABIC had “committed [themselves] to supply melamine to [their customers] up to and including Q3 2008,” the note said.

SABIC officials would not comment on the issue, while a spokesman was not available.

A south Asian market source familiar with SABIC said that it was not surprised with the petrochemical major’s decision, as “melamine production yielded low returns and this would have been the main consideration that led to the melamine production stoppage”.

But the mothballing of the Al Jubail unit was not expected to affect the Asian market.

“Most of SABIC’s melamine goes to European countries, as it is more profitable to send to Europe [than selling to rest of the world],” said the south Asian source, adding that the impact on Asian markets would be minimal.

Asian melamine prices were unchanged from the previous week at $1,850-1,950/tonne CFR (cost and freight) southeast Asia, with talk of this permanent closure having little impact on market sentiment, traders said.

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By: Leon Toh
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