Tasnee CEO says petchem sector outlook ‘still unclear’, demand indicators improving

Tasnee CEO, Mutlaq Almorished

National Industrialization Co. (Tasnee) CEO Mutlaq Almorished said that the outlook for the petrochemical market is “still unclear” in light of the global economic fluctuations, and the recession that affected most countries.

The recession, expected to continue during the current year, led to a decline in prices and demand in most markets since mid-2022, in addition to the effects of the Russian-Ukrainian war, he said.

In a phone interview with Argaam, Almorished said that prices of most products have improved slightly since the beginning of the year, expecting better prices to continue in the second half of 2023 due to improving global recession indicators and the removal of COVID-related restrictions in China as per the reports of analysts and economic organizations.

He pointed out that the average price of propane reached nearly $453 per ton, stating demand remained at average level in the fourth quarter of 2022.

As the year-end was approaching, customers were keen to reduce inventory amid a lack of clarity on price trends, and the desire of most customers to wait until the price levels stabilized, Almorished said.

Commenting on the financial results, the CEO said that the decline in profits was mainly due to lower sales and prices of most petrochemical products, in addition to higher financing costs.

The company’s total consolidation loans amounted to SAR 10.5 billion, he noted, stressing that the rise in interest rates impacts the non-fixed-rate portion variable rate portion of the loans, which reached 50%.

He added that logistics costs increased by 70% year-on-year (YoY) in 2022, despite the noticeable gradual improvement and decrease in costs during H2 2022 by nearly 30% compared to H1 2022, expecting logistics rates to return to pre-pandemic levelsin 2023.

Additionally, he noted that the products’ demand indicators have begun to improve, due to the decrease in supply in some markets on scheduled shutdowns in some factories for periodic maintenance. Most products started to see better price levels, which will reflect positively on the company's performance, Almoraished also indicated.

Regarding the Titanium Ilmenite Smelter Plant Project to improve operational processes and production, he explained that work is underway to reach 70% of the design capacity in the second half of 2023.

According to data available in Argaam, the company's profits decreased to SAR 666.3 million by the end of 2022, a 51% YoY decline, from SAR 1.35 billion recorded during 2021. Q4 profit stood at nearly SAR 43.1 million.