Resin manufacturing giant Saudi Basic Industries Corp. plans to build a $5.2 billion plastics and chemical complex in China, the largest foreign joint venture investment in China's petrochemicals industry to date, provided it can win approval from Beijing.
Sabic, the world's fourth-largest maker of polyolefins, would like to build what it calls a ``world-scale,'' vertically integrated facility for polyethylene, polypropylene and other plastics in Dalian, China. The plan could include a refinery and feedstock production.
The project would be Sabic's first production in China, where the firm plans to partner in the investment with large Chinese extrusion company Dalian Shide Plastic Industry Co. Ltd., said Abdulrahman S. Al-Ubaid, vice president of Sabic's polyolefins unit at the Riyadh, Saudi Arabia-based company. He spoke during an interview at Chinaplas, held April 26-29 in Shanghai.
Sabic officials declined to reveal planned production capacities, saying their application is pending before the Chinese government, and authorities could decide to grant approval only to parts of the plan.
But Sabic officials said they are encouraged that Chinese President Hu Jintao discussed the project with Sabic executives during an April 22 visit to company headquarters in Riyadh, and later with reporters traveling with the Chinese leader.
At the April 22 meeting, Prince Saud bin Thunayan Al-Saud - who serves as Sabic's chairman - praised the ``strong and ever-growing political, economic and technological relations'' between the two countries.
China is a major market for many of Sabic's products, including polyethylene and polypropylene. The state-run firm is adding billions of pounds of petrochemical capacity as a means of leveraging its plentiful supplies of natural gas.
Sabic also is supplying raw materials to a PVC resin plant operated on Hulu Island in China's Liaoning province by profile maker Dalian Shide Plastic Industry Co. Ltd. and Jinghua Chemical Industrial Group.
Mohamed Al-Mady, Sabic vice chairman and chief executive officer, said Sabic has been exporting its products to China since the 1980s.
In a news release, Al-Mady said Sabic ``will reinforce [its] presence in China by establishing mega-industrial projects.''
Sabic currently operates 17 manufacturing sites in Saudi Arabia and single sites in the Netherlands and Germany.
``The Chinese market is a key strategic global petrochemical market from Sabic's point of view,'' Al-Mady said. ``As [Saudi Arabia's] leading company, we would continue to foster close commercial relations with China.''
Although China itself is adding large amounts of PE and PP capacity, the country remains a net importer. In 2004, about 50 percent of PE and 40 percent of PP consumed in China was imported.
South Korea currently is China's largest external PE/PP supplier, with a 20 percent share, but market experts believe the Middle East eventually will take that spot as more resin capacity becomes available in Saudi Arabia and other countries.
Sabic has been growing rapidly in recent years, in part because of low-cost feedstocks in the Middle East. Sabic currently is the third-largest PE maker in the world, and the fourth-largest polyolefin company, and its growth should push it to second in PE and third in polypropylene by 2010, Al-Ubaid said.
Sabic exports about 2.2 billion pounds of plastic a year to Asia, with ``very significant'' amounts of that going to China, Al-Ubaid said. The company's absence from local production had drawn the attention of analysts, who speculated that it was ripe to establish a larger presence in China.
Al-Ubaid said the investment would be part of a $15 billion outlay that would boost Sabic's overall petrochemical production from 94.8 billion pounds to 141.1 billion pounds by 2008.
News of the investment came as the company announced an expansion of its distribution capabilities for plastics in Asia.
The April 25 announcement said the company will set up two new warehouses in China and other warehouses in Ho Chi Minh City, Vietnam, and Melbourne, Sydney and Auckland, Australia.
Sabic plans to establish new offices in Beijing; southern China; Jakarta, Indonesia; Melbourne; and Ho Chi Minh City, and it plans to convert its Shanghai office into a fully registered company.
The company wants nine distribution centers in Asia by next year, up from three now, he said. Sabic also said it has established technical support engineers in Shanghai and Singapore.