Industry analysts recently said that the Saudi Petroleum and Mineral Resources Department is expected to gradually increase the price of natural gas sold to domestic industrial users while reducing the propane price discount rate. Although no official news has been seen yet, Saudi Arabia has confirmed a few years ago that it will increase the price of ethane from 75 cents/million BTU to 1.25 US$/million British heat since 2012. unit. With the increase in raw material prices, the raw material cost advantage of Saudi local petrochemical companies will gradually weaken.
According to a report from the HSBC Global Research Department, Saudi Arabia is very likely to announce reform of raw material pricing in 2011, but this change will be affected by economic and policy factors, considering that the current global natural gas price is 4 to 5 US dollars/ One million British thermal units, while Saudi Arabia's natural gas price is only 75 cents per million British thermal units, so the price increase will be carried out step by step, it is unlikely to be in place once, and it is unlikely to fundamentally change the competitive advantage of the Saudi chemical industry. .
The report pointed out that the impact of rising raw material prices on profitability is most serious for companies with significant cost advantages, such as Saudi Arabia Chemical Fertilizer Corporation (SAFCO); and for companies with low cost advantages, the impact is limited.
HSBC expects that Saudi gas prices will be further raised after increasing to US$1.25 per million British thermal units in 2012. It will be raised to US$1.50 per million British thermal units in 2013 and will be raised to US$2 per 100 units from 2014. Million British thermal units. The discount rate for propane prices will also be reduced from 28% in 2011 to 27% in 2012 and 26% in 2013. The discount rate will stabilize at 25% from 2014.
Other industry analysts have similar expectations. Ankit Gupta, an analyst at Bico Sico Research, stated: “We forecast that Saudi gas prices will be raised to US$1.25/million BTUs from 2012, and the discount rate for propane will be the same as in 2011. It is 28%.†Gupert also pointed out that although the Saudi government has not yet confirmed that it will reform raw material pricing, the reform scheme for the propane and butane pricing mechanism has been completed and will be approved in 2011. It is expected that reforms will start in 2012. . However, the information disclosure by the Saudi government in the reform of the pricing mechanism for raw materials is very opaque, including time schedules and upward adjustments.
According to a report from the HSBC Global Research Department, Saudi Arabia is very likely to announce reform of raw material pricing in 2011, but this change will be affected by economic and policy factors, considering that the current global natural gas price is 4 to 5 US dollars/ One million British thermal units, while Saudi Arabia's natural gas price is only 75 cents per million British thermal units, so the price increase will be carried out step by step, it is unlikely to be in place once, and it is unlikely to fundamentally change the competitive advantage of the Saudi chemical industry. .
The report pointed out that the impact of rising raw material prices on profitability is most serious for companies with significant cost advantages, such as Saudi Arabia Chemical Fertilizer Corporation (SAFCO); and for companies with low cost advantages, the impact is limited.
HSBC expects that Saudi gas prices will be further raised after increasing to US$1.25 per million British thermal units in 2012. It will be raised to US$1.50 per million British thermal units in 2013 and will be raised to US$2 per 100 units from 2014. Million British thermal units. The discount rate for propane prices will also be reduced from 28% in 2011 to 27% in 2012 and 26% in 2013. The discount rate will stabilize at 25% from 2014.
Other industry analysts have similar expectations. Ankit Gupta, an analyst at Bico Sico Research, stated: “We forecast that Saudi gas prices will be raised to US$1.25/million BTUs from 2012, and the discount rate for propane will be the same as in 2011. It is 28%.†Gupert also pointed out that although the Saudi government has not yet confirmed that it will reform raw material pricing, the reform scheme for the propane and butane pricing mechanism has been completed and will be approved in 2011. It is expected that reforms will start in 2012. . However, the information disclosure by the Saudi government in the reform of the pricing mechanism for raw materials is very opaque, including time schedules and upward adjustments.
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