• Home
• Construction
• News Article

Saudi Arabia: Cost of steel production to go up 7%: Al-Murished

RIYADH: Cost of steel production could go up by seven percent because of the increased power tariffs imposed by the Saudi Electricity Company ( SEC ), Mutlaq Al-Murished, vice president finance of Saudi Basic Industries Corp. (SABIC) said on Monday.

Al-Murished was speaking at a press conference following the release of his company's second quarter financial results, which indicated SABIC's profits rose 177 percent from a year ago to SR5.02 billion as new output came on stream.

Addressing a press conference, Al-Murished said the increase in electricity tariffs would not affect the other steel production plants very much.

Last year, SABIC's Saudi Iron and Steel Company ( HADEED ) produced 4.776 metric tons of steel. HADEED is the region's leading steel producer, manufacturing both long and flat steel products. It covers about 62 percent of the Kingdom's steel demand.

Last month, SEC announced that its board of directors had decided to increase power tariffs for the government, commercial and industrial sectors effective July 1.

Al-Murished also said Saudi Kayan Petrochemical Company in Jubail will go on stream this year. The complex will have a production capacity of 1.35 million tons per year of ethylene and 2.6 million tons a year of finished products including polyethylene, polypropylene, ethylene glycol, polycarbonates and amines.

The complex will also produce aminoethanols, aminomethyls, dimethylformamide, choline chloride, dimethylethanol, dimethylethanolamine, ethoxylates, phenol, cumene and polycarbonate which will be produced for the first time in the region.

He said excess stocks should be less of a problem and prices were stabilizing in the second half as its shares fell on quarterly results that showed weak prices hurting profits. The official also said it had no plans for a bond issue in the coming months.

He said that the company raised SR8.25 billion ($2.2 billion) through two loans last month from state-run National Commercial Bank (NCB) and Alinma Bank, in which the Finance Ministry's Public Investment Fund ( PIF ) is the largest shareholder. PIF holds a 70 percent stake in SABIC.

The company which ranks among the world's top six petrochemicals companies is not desperate to raise funds since it has SR50 billion in its reserves. "We may generate funds as and when the need arises," he stressed. Al-Murished said debt problems in the euro zone were not affecting the petrochemical market, pointing out that major growth could be witnessed in Asia and in the Middle East. He noted that according to global indicators there is stability in the world market.

"With the improvement in the world economy and the US economy, we are doing quite well," Al-Morished said.

Petrochemical product prices will be "stable" in the third quarter and the outlook for the period depends on the global economy, he noted.

The International Monetary Fund (IMF) on July 8 raised its forecast for global economic growth this year to 4.6 percent, which would be the fastest since 2007, from the 4.2 percent it predicted in April.

SABIC started commercial operations this year at its units Eastern Petrochemical Co. (Sharq), and Yanbu National Petrochemical Co. (Yansab) . In addition, SABIC and China Petroleum & Chemical Corp. (Sinopec), started producing this year at a joint-venture complex in Tianjin, China.

SABIC shares closed unchanged at SR87.75 in Riyadh trading. The stock has gained 6.4 percent this year, with the company being valued at SR263 billion.

By MD Rasooldeen

© Arab News 2010