A recently announced joint venture enables Jeddah-based National Petrochemical Industrial Company (Natpet) to produce polypropylene compounds.

Natpet, a subsidiary of Alujain Corporation, is partnering America’s A Schulman in a 50:50 collaboration to produce the polypropylene. The new venture, likely to be called Natpet-Schulman Plastic Compounds, will be set up in Yanbu and production is set to begin by the end of 2014.

A Schulman will make an initial investment of 11 million euros ($14 million) into the venture. Based on current exchange rates, initial project costs including construction of the facility, infrastructure and working capital will amount to 55 million euros.

Beyond the initial equity investment by the partners, the joint venture intends to take advantage of various low-interest loan options provided by the Saudi Industrial Development Fund and other lending institutions.

The joint venture will manufacture a line of customer-preferred engineered plastic compounds based on A Schulman’s highly regarded technology. Natpet, a well-established petrochemical producer in the region, will provide the joint venture with its regional infrastructure as well as its high-quality polypropylene resin.

The joint venture’s new plant will enable A Schulman and Natpet to serve a broad range of customers in the Middle East, Africa and India to capitalise on the growing demand for durable goods and transportation products.  All sales outside of these regions will be sold directly through A Schulman.

“Several aspects of this deal will accelerate A Schulman’s expansion and visibility in its priority growth markets of Africa, India and the Middle East while better serving our existing global customers with high-quality polypropylene compounds,” said Bernard Rzepka, general manager and chief operating officer of A Schulman, EMEA.

“This joint venture furthers Natpet’s vertical integration plan.  It is a crucial enabler of creating further downstream projects,” said Marwan Nusair, president of Alujain.