InterviewGPCA '11: Sipchem eyes acquisitions, downstream growth - CEO

15 December 2011 04:12  [Source: ICIS news]

By Prema Viswanathan

DUBAI (ICIS)--Saudi International Petrochemical Company (Sipchem) is looking at acquisitions and downstream expansion as part of its growth strategy, the company’s CEO said late on Wednesday.

“We are keeping our eyes open for any opportunity that will help us to enhance our competitiveness in the export market and also go downstream in areas where we can add value,” said Sipchem CEO Ahmad Al-Ohali, in an interview on the sidelines of the sixth annual GPCA (Gulf Petrochemicals & Chemicals Association) conference in Dubai.

The company is looking to acquire assets or services in Europe and Asia to extend its marketing and manufacturing capability, or embark on greenfield operations if the right opportunity presents itself, Al-Ohali said.

Sipchem has just acquired Swiss petrochemical trading and marketing firm Aectra through its affiliate firm, Sipchem Marketing & Services Company (SMSC).

“Acquisitions are a good way to gain quick access to local marketing expertise, but we are also open to setting up our own greenfield projects close to our key markets in Europe and Asia if the economics are right,” Al-Ohali said.

Sipchem currently produces about 2.2m tonnes/year of chemicals through its five operating affiliates. Its product portfolio includes methanol, acetic acid, vinyl acetate monomer (VAM), ethylene vinyl acetate (EVA), low density polyethylene (LDPE), butyl acetate, ethyl acetate and butanediol (BDO).

“We are not looking currently to expand our methanol capacity as there is sufficient supply in the global market but will focus more on going downstream in line with the Saudi government’s objectives,” the Sipchem CEO said.

Another deterrent towards investing heavily in basic chemicals is the limited availability of gas feedstock in Saudi Arabia, he added.

In line with this strategy, along with the start-up of its new 200,000 tonne/year EVA/LDPE plant at Al Jubail in June 2013, the company plans to set up a 25,000 tonne/year wire and cable polymer compounding plant.

“This is a growing segment in the Middle East, as well as in Asia, with strong demand potential in future,” Al-Ohali said.

Partnering with Asian players has helped the company expand its marketing and sales footprint in Asia. The joint venture with South Korea’s Hanwha Chemical for the EVA/LDPE project was progressing very well, he said.

“We are very happy with the collaboration,” Al-Ohali said.

In future, Sipchem may also look at producing EVA with VA content of above 28% to cater to the solar panel applications segment, he said.

“The tubular plant has the capability of producing this grade, but we will decide on that after analysing the market,” he said.

The Sipchem executive expects demand for petrochemicals in Europe to grow at 0-1% in 2012, down from 3-3.5% in 2011, because of the debt crisis that has hit the region’s economy.

“Our sales to Europe have not been affected so far, but we expect 2012 to see slower growth,” Al-Ohali said.

However, the company’s strategy of market diversification will help it ride the crisis, he said.

“Markets like India and northeast Asia are likely to see strong demand for construction chemicals and this will help balance the slow growth in Europe,” Al-Ohali said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Prema Viswanathan
+65 6780 4359

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