Saudi Kayan to be ‘middle of the pack performer’ - analysts

12 January 2010 14:46  [Source: ICIS news]

TORONTO (ICIS news)--Basic petrochemicals producer Saudi Kayan Petrochemical will be a “middle of the pack” performer in the Middle East in terms of its feedstock costs, after it starts up in 2011, analysts said on Tuesday.

The company’s likely olefin/polyolefin feedstock mix will be 35% ethane and 65% butane, according to an analysis by ALEMBIC Global Advisors, an independent New York-based equity research firm.

“Our analysis shows that such a feedstock mix only generates a 20%-cost advantage, at current US natural gas prices, relative to US ethane-based producers versus pure ethane-based Middle Eastern producers at a 60%-cost advantage,” the analysts said.

Also, a combination of oversupply and lacklustre demand should result in depressed utilisation rates at Saudi Kayan’s core polycarbonate business, the analysts said.

Saudi Kayan, which was set up in 2006 and had its initial public in 2007, is currently in the pre-operation stage.

The analysts expect the company to start production by the second quarter of 2011. The company's overall petrochemicals capacity would be around 5m tonnes/year, they said.

SABIC has a 35% stake in the company and Al-Kayan Petrochemical has 20%, while the remaining 45% stake is publicly held.

ALEMBIC has started covering Saudi Kayan with a target price of Saudi riyal (SR) 20/share and a “neutral rating”. The shares were priced at SR19.10, down 1.29%, on the Saudi Stock Exchange at EST 9:07.

($1 = SR3.75)

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By: Stefan Baumgarten
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