2023-05-30 09:09:07
Al-Rajhi Capital confirmed that the petrochemical sector is facing challenges due to the sharp decline in the prices of most products (especially polymers), but the calm in some raw materials prices neutralized the headwinds, adding that the slowdown in prices on a quarterly basis was driven by the market’s over-optimistic view of a recovery China.
According to “Al-Rajhi Capital,” the markets witnessed an increase in demand due to the reopening of China, but the recovery is slower than expected in demand, in addition to the abundance of supply adding to pricing pressure across the main products, noting that the international investment index in China for the month of April 2023 came at 5.6%, which is Well below expectations of 10.9%. Besides, the decline in the global manufacturing index indicates that demand for some petrochemical products may take longer to rise.
She added that the correction in oil prices (year-to-date – 8.6%) supported the widening price differentials across certain products. These differences are unlikely to be sustainable as product prices have begun to witness a gradual improvement driven by the recovery in oil prices due to the OPEC production cut, if it is implemented successfully.
On the other hand, “Al-Rajhi Capital” recommended neutrality to 5 companies under its coverage, which are Advanced, SABIC, and SABIC Agri-Nutrients, while it reduced its recommendation to Sipchem to neutrality, due to the sharp decline in methanol prices and the current pricing pressure on intermediate chemicals, suggesting a downside potential in Yansab due to the stagnation in prices Products and the expected rise in the prices of naphtha raw materials for the year 2023.
| company | Target price per share (SAR) | recommendation |
| advanced | 45 | neutrality |
| It flows | 40 | neutrality |
| SABIC Agricultural Nutrients | 139 | neutrality |
| Sabek | 91 | neutrality |
| Sipchem | 40 | neutrality |
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