Saudi Arabia’s petrochemical sector is likely to continue facing “difficulties and challenges” in 2023, as product margins will come under pressure, Riyad Capital said in a report.

“This comes on the back of fears of economic recession, high levels of inflation, increased production capacities globally and weak demand followed by the impact of China lockdowns, which will put pressure on product margins,” the brokerage said in its Q4 2022 preview.

In Q4 2022, petrochemical prices declined sharply across the board and were below the preceding quarter’s levels. In addition, the second half of 2022 was a difficult period for the Saudi petrochemical sector, the report noted.

In its earnings forecast, the brokerage predicted Saudi Basic Industries Corporation (SABIC) to post a 70% decline year-on-year in net profit to 1.5 billion Saudi riyals ($399.48 million) in the fourth quarter of 2022.

Advanced Petrochemical Company will see net profit falling 88% year-on-year to SAR 20 million. At the same time, National Industrialisation Company’s net earnings will drop 89 percent year-on-year to SAR 38 million in Q4 2022, the report added.

(Editing by Seban Scaria seban.scaria@lseg.com)