DÜSSELDORF, GERMANY (Nov. 26, 11:20 a.m. EST) — The future of the former GE Plastics business now is intertwined with the future of the global petrochemicals market.
Saudi Basic Industries Corp. of Riyadh, Saudi Arabia, is a major commodity plastics and chemicals maker that's assimilating GE Plastics, one of the best-known engineering plastics makers in the global market. Sabic paid General Electric Co. $11.6 billion for GE Plastics earlier this year and has renamed the unit Sabic Innovative Plastics.
“Feedstocks are volatile and historically high in price, and customers are more demanding than ever, but we're patient and committed to the long term,” Sabic IP President and Chief Executive Officer Brian Gladden said at a news conference at K 2007, which ran Oct. 24-31 in Dusseldorf.
Sabic Vice Chairman and CEO Mohamed Al-Mady added that the purchase is part of Sabic's long-range growth plan.
“GE Plastics now is part of Sabic, and we're in the process of integration,” he said. “Results will be higher than last year and last quarter. Engineering plastics aren't part of the old Sabic, but there are a lot of synergies there.”
Sabic also will continue to expand its presence in global polyolefins, a strategy made possible by Middle Eastern natural gas costs of less than $1 per unit, as compared with recent U.S. prices of more than $7. Sabic already ranks among the world's five largest makers of high and linear low density polyethylene, and will add almost 20 billion pounds of new capacity for PE and polypropylene by 2010.
Officials previously have said Sabic IP may be used as a channel for Sabic PE and PP to be sold into North America. At the news conference, Al-Mady said his firm continues to look at production opportunities in the U.S. and China.
“The U.S. is a very important market to us and we'll evaluate opportunities,” he said. “We don't necessarily want an opportunity to come to us. We may have to do it ourselves.”
In China, Al-Mady said, Sabic has been in discussions with state oil firm Sinopec for some time about the possibility of producing plastics and petrochemcials there. “We have to be patient,” he said of the Chinese situation. “These things take time.”
Al-Mady added that Sabic welcomes downstream investment in Saudi Arabia's small-but-growing plastics processing market.
“We want to use our product and create jobs for young people,” he said. “But these opportunities have to be evaluated carefully on a business case basis.”
One direct way in which Sabic IP can benefit from Sabic's commodity portfolio is by access to polypropylene, which could be used in blends with existing resins. Sabic IP's LNP compounding unit already has some such materials.
Having PP “is a nice package for automotive,” Gladden said in an interview after the news conference. “We need to see how that might play out in some new blends for automotive or other markets.”
Sabic IP officials also remain bullish about the Exatec polycarbonate auto window glazing business. Sabic IP bought out Bayer MaterialScience AG's share in the 10-year-old joint venture earlier this year.
“With Exatec, the technology is there,” Gladden said. “We've convinced [original equipment manufacturers] of that. What keeps us back is having enough capacity in place. We've been focused on building technology and improving scratchability performance.”
Gladden also said that Sabic IP expects to announce an Exatec-related partnership with a global auto parts firm within 60 days.
“We're excited about it,” he said. “We're convinced that polycarbonate is the answer.”
Sabic IP, which posted sales of $6.7 billion in 2006 , also plans to open a plant making Ultem-brand polyetherimide resin in Cartagena, Spain, next year. The plant's output will be sold into aircraft and aerospace parts and parts used in the oil and gas industry.
Globally, Gladden said that Sabic IP anticipates short-term annual growth of 6 percent for the PC market.
“There's strong demand in high-tech applications for medical and electronics. Optical-media demand will erode over time, but the key is innovating new products with higher margins,” he said.
The company has introduced 50 new polycarbonate products this year, he said.