By Abdulla Fardan and Glen Carey
Nov. 10 (Bloomberg) -- Petrochemical prices have tumbled 50 percent since October as the global credit crisis weakens demand, according to the head of Saudi Basic Industries Corp., the world's biggest chemicals maker by market value.
``The price retreat started precipitously from the end of September and early October,'' Chief Executive Officer Mohamed al-Mady said today in an interview with Dubai-based al-Arabiya television. ``We were expecting the price to fall next year.''
Tightening credit and slowing economies threaten Sabic's payback on last year's $11.6 billion acquisition of General Electric Co.'s plastics unit. The purchase, the largest by a Gulf-based company, gave Sabic a network of factories making resins and thermoplastic sheets used in cars, roofs and lighting, just as the auto and construction industries cut output.
Sabic's fourth-quarter net income will be affected by falling prices for petrochemical products, al-Mady said, adding that the company may benefit from declining production expenses as feedstock costs retreat.
``A combination of lower prices for petrochemical prices and demand are likely to translate into weaker earnings, even if falling oil prices reduce the cost base,'' Laurent Gally, an analyst at Dubai-based Shuaa Capital PSC, said today by telephone. ``Not only is U.S. and European demand slowing, but so is Chinese demand.''
Sabic has reduced its polyethylene price to 3,700 riyals ($986.50) a ton from 7,000 riyals, the Jeddah-based Okaz newspaper reported on Nov. 5. The company is also expected to cut polypropylene prices 35 percent to 3,788 riyals a ton this month from 5,813 riyals in October, al-Riyadh reported Oct. 27.
Sabic slid 2.6 percent to 66.25 riyals in Riyadh trading today, valuing the company at 198.8 billion riyals. The stock has lost 60 percent this year.
To contact the reporters on this story: Glen Carey in Dubai at gcarey8@bloomberg.net; Abdulla Fardan in Bahrain at afardan@bloomberg.net
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