Strategic integration, consolidation and partnerships key to unlocking industry growth
Yousef Al-Benyan, Vice Chairman and CEO, SABIC, and Chairman, GPCA, discusses industry headwinds, consolidation, partnerships, and the opportunities for growth that will be unlocked through SABIC’s acquisition by Saudi Aramco.
How should the GPCA’s member companies view the macro-trends that have impacted the chemicals and petrochemicals industry during the year, with economic uncertainty, global recession fears, and the US-China trade war creating a growing atmosphere of uncertainty?
Al-Benyan: The chemical industry is facing a number of headwinds from a slowdown of the global economy, trade tensions, and political uncertainties. The reality for any business is that uncertainty creates more challenging environments. The petrochemicals industry is right to be cautious. SABIC is a global chemicals business and as a consequence we, like others, are exposed to global economic trends and input cost price fluctuations. We address this by being diversified geographically, as not all economies move in perfect synchronicity, and by focusing on producing products that are innovative, value-adding, and that address secular trends such as feeding growing populations, electronics, sustainability, etc. We are confident about the long-term prospects of the industry and so we remain focused on our growth strategy.
Industry consolidation is a natural step as GCC countries and companies evolve their portfolios for greater efficiencies and competitiveness, and SABIC is no exception to this, just recently receiving regulatory approval for the merger of its wholly owned subsidiaries SADAF and PETROKEMYA. What are the main integration benefits of this consolidation?
Al-Benyan: The merging of SADAF and PETROKEMYA is part of SABIC’s strategic transformation plan to increase the efficiency and competitiveness of its global operations. Our aim is to create a more efficient entity that will increase the optimization of assets and unlock value from the synergies between the two companies’ product streams. The merger follows the successful Takamol reorganization project for SABIC Agri-Nutrients and is designed to deliver similarly effective and streamlined operations, maintenance, and project execution. The transformation process is being driven by structural challenges in the global marketplace, including volatile feedstock and energy prices as well as increasingly strong global competition enabled by industry consolidation.
We are responding by restructuring our own businesses, driving cost discipline, customer focus, and increasing growth. These steps are essential if we are to make our vision of becoming the world’s preferred supplier of chemicals into a reality.
SABIC is, of course, also itself in the process of being acquired by Saudi Aramco. You said at the time of the official announcement in March that the potential rewards of the deal were clear and supported SABIC’s vision to be the preferred world leader in chemicals. Can you talk about some of the main benefits that SABIC will gain from Aramco that will help it achieve this vision?
Al-Benyan: The move aligns two major global companies to address fast-growing petrochemicals, which is expected to be the fastest-growing sector of oil demand to 2040. We expect the transaction to unlock growth opportunities and competitiveness. It enables more effective growth and competitiveness by complementing the strengths and capabilities of both companies. Specifically, Saudi Aramco’s crude oil and gas availability, downstream assets, technical capabilities, and ability to invest in and execute growth projects at a very large scale, with SABIC’s technical capabilities, petrochemical assets, channels, and access to market.
The Annual GPCA Forum’s theme this year is ‘Winning through Strategic Partnerships.’ How do you view the progress that has been made so far by the GCC petrochemical and chemical industries in terms of partnership initiatives, and what is SABIC doing in this area? What benefits of scale do such partnerships bring?
Al-Benyan: Integration, consolidation, and partnership strategies are essential to sustaining our growth trajectory and reshaping the future of the petrochemical industry in the Middle East. Partnerships are becoming the differentiating factor for success. SABIC has a proud history of forming smart partnerships that support growth, from our agreement with our Japanese partners to found Ar Razi in 1976, up to the recent ground-breaking ceremony for a new petrochemical joint venture project with ExxonMobil in the US Gulf Coast. As we have found, partnerships can leverage capital and capability sharing. They can grant access to new technologies, increased competitiveness, and create new growth for shareholders.
Sustainability is a key factor in every GPCA member company’s business strategy. Can you give some examples of successful sustainability initiatives implemented by SABIC and/or the wider industry that have helped to shift public opinion, and that help the GCC evolve towards a circular economy?
Al-Benyan: Sustainability is one of the foundational elements of SABIC’s strategy. As an industry leader we recognize that initiatives such as the circular economy can be hugely beneficial for both business and the environment.
To build a truly circular economy and meet the needs of our customers and consumers, the maximum value of the plastics waste stream needs to be retained and reused. We recently introduced TRUCIRCLE; an initiative that encompasses our circular materials and technologies to enable consumer product manufacturers to address one of the planet’s most urgent sustainability challenges – the reduction of mixed plastic waste. This year, we also moved our Sustainability department into the Technology and Innovation function, helping to further accelerate the adoption and development of new sustainable and circular products.
Our innovations and collaborations across our customers and partnerships help make a difference and contribute to deliver better, sustainable solutions the world needs, and to drive the industry forward, helping build a better world.
How quickly are plastics recycling and plastic waste initiatives progressing? Will this need to be accelerated, with public opinion so strongly focused on the industry?
Al-Benyan: Innovative plastics make modern life possible, but even the most beneficial product can be harmful if it is misused or disposed of improperly. Consumers, governments, and the business community alike are searching for ways to address this challenge. The global community of companies that produce and use plastics can and must be part of the solution. At SABIC we believe circular polymers are a key to fulfilling the promise of a circular economy. Our collaborations with our upstream suppliers and key downstream customers have opened new possibilities to upcycle mixed plastic waste back to the original polymer for packaging applications. This is an example of the circular economy at work.