10 December 2009 20:11 [Source: ICIS news]
By Prema Viswanathan
DUBAI (ICIS news)--Petrochemical major Saudi Basic Industries Corp (SABIC) intends to eventually pursue the acquisitions route to gain access to technology and markets, the CEO Mohamed Al-Mady said on Thursday.
However, there were no immediate plans on the drawing board to make new acquisitions, Al-Mady said.
“Early in the game we realised that it is important to have a technological platform to gain market franchise,” said Al-Mady, in an interview with ICIS news on the sidelines of the 4th Gulf Petrochemicals and Chemicals Association (GPCA) forum.
In a challenging market situation, there is a pressing need to remain competitive, said the SABIC leader.
“There are three legs to competitiveness: one is material inputs, the second is market access and the third is innovation. Material inputs I think we have in ?xml:namespace>
Despite some worries about inadequate natural gas availability to meet industry needs, he said he was optimistic that the situation would improve.
But to gain market access in a meaningful way, it is only possible to do it through acquisitions, he said.
“Innovation too is possible through acquisitions, otherwise we have to wait too long,” he said. Acquisitions also made give the company ready access to quality staff, he added.
“We can look at acquisition opportunities if they fit into our overall strategy. And if the price is right.” But right now, he said his hands were full with all the new projects due on stream in
This was the main impetus behind SABIC’s acquisitions of the assets of DSM, Huntsman and GE Plastics, he said.
The last acquisition saw the company making forays into the speciality chemicals segment, a focus that SABIC wants to strengthen. “Of course, in the past year, we saw both specialities and commodities go down, but we hope in the coming years, engineering plastics will perform better than commodity plastics,” said Al-Mady.
Although the poor performance of engineering plastics dragged down SABIC’s bottom line somewhat in 2008, Al-Mady said he had no regrets about the GE Plastics acquisition.
“Engineering plastics in general suffered last year due to the slowdown in the automotive, construction and electronics segments," he said. There is improvement now, but demand still hasn’t reached prior-2008 levels. There is a big improvement in the last two quarters. We expect further improvement next year.”
The diversification into specialty chemicals - a trend encouraged by the Saudi Arabian government - is best exemplified by the Saudi Kayan project. Although the start-up of two of the units has been delayed to 2012, the remaining 14 plants in the complex are expected to start up from end-2010 through 2011, said Al-Mady.
“Many of the products in the complex will be produced for the first time in
Once the project takes off, SABIC will have a gamut of products to offer customers, he added.
Joint ventures have been another route pursued by SABIC to access technology and markets.
The Sharq joint venture between SABIC and a Japanese consortium, which is undergoing a major expansion currently, and the Yanpet complex, a joint venture between SABIC and ExxonMobil, are good examples of successful collaborations within
SABIC has also sought to tap into the Chinese market through the
The recently announced joint venture with US-based additives and catalyst maker Albemarle marks another kind of diversification. “We will be making a catalyst called TEED (tetraethylethylenediamine) for polyolefin production - it will be utilised here in
“We try to produce our inputs whether it’s raw material or catalyst, when we have a critical mass. But the plant in its own right is commercially viable. The catalyst can be used anywhere,
However, “In India, we have a compounding unit for polycarbonate, and also a research centre, but no major manufacturing facility,” said Al-Mady.
The SABIC chief said he has many contentions with the Indian authorities. “I’m not saying the Indian policy is not transparent, but there is no opportunity. We’re not invited to do investment. Normally, you have to invite major companies to invest in your country, show them what you have, show them what benefits you will get.”
He also complained of protectionist measures adopted by the Indian authorities.
The Indian government recently imposed anti-dumping duties on polypropylene imports from
“We are talking to the Chinese and they are responding favourably to our discussions on the anti-dumping measures,” Al-Mady said. “In the case of
It is important to allow competition between the local producers and those from outside the country, so that the customer benefits, said Al-Mady. “Otherwise the local producers will raise the prices and this will hurt the customer.”
In Gulf Cooperation Council (GCC) countries, including
“Competition in the market is healthy for everybody. That’s why we are against trade barriers, we want competition. Competition is good for us because it makes us work harder and go for innovation and cost reduction programmes.”
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