Sabic expects its diverse product portfolio to help it weather the impact of lower revenues from its steel business. Sabic, whose Hadeed steel affiliate is the kingdom’s largest plant of its kind, has cut prices by 43 per cent since September on sagging demand.
“Conditions for steel are difficult, global prices have reached too low a level to allow plants to break even and stocks are high, consumption is also declining,” vice-chairman and chief executive officer Mohamed Al-Mady said.
“But because we are a diversified firm that has many products, we are at the present time breaking even unlike other steel firms,” he said, dismissing the possibility of redundancies.
State-owned Sabic controls 100 per cent of Hadeed. Al-Mady could not say by how much steel demand has declined.
Sabic’s metals business, made up essentially of Hadeed, accounted for 13.3 per cent of Sabic’s profit in the nine months to September 30 and 10.3 per cent of its turnover.
In addition to steel, the company produces fertilisers and petrochemicals and holds stakes in aluminium companies such as Bahrain-based Alba.
Saudi Arabia has steel production capacity of about 8.4 million tonnes, of which 5.5 million tonnes can be produced by Hadeed, according to the website of Arab Steel, an industry association.
Saudi steel makers’ woes are amplified by imports of steel mainly from Turkey and Ukraine.
Al Ittefaq Steel Products Company, one of the country’s three largest steel makers, has notified 80 per cent of its 2,145 workers that they will be temporarily laid off over a three-month period to cut costs, a company official said.
Hadeed plans to more than triple its production capacity to 17 million tonnes by 2020, its general manager Hisham Al Hamili said.
Having almost doubled in two years, steel prices started to decline recently after authorities banned scrap metal exports and as demand waned on spiralling costs which, along with other input costs, raised fears over the viability of some projects.