Sahara International Petrochemical Company (Sipchem) and Sabic AN have announced that they have received an official notice from Saudi Arabian Oil Co. regarding an increase in the prices of certain feedstock materials.

Key Takeaways:

• Sipchem has received notice from Saudi Aramco regarding a feedstock price increase, effective from January 1, 2025.
• The price hike is expected to impact approximately 2% of Sipchem’s total cost of sales, beginning in Q1 2025.
• Other industry players, including Sabic AN, are also experiencing similar feedstock price increases.

The price hikes, which took effect on January 1, 2025, will see the company’s estimate increase amount to approximately 2% of its total cost of sales, based on the latest audited financial statements.

In a statement filed with Tadawul and as reported by Argaam, Saudi Arabia's stock exchange Sipchem acknowledged the price adjustment and reassured investors that it is actively working to mitigate the financial impact. The company outlined that the increase would start to affect its results from the first quarter of 2025.

The price adjustments also come in the wake of similar announcements from other industry players. Sabic AN, another leading player in the Saudi petrochemical sector, indicated that its own feedstock price increase would have an impact equivalent to approximately 3.7% of its annual cost of sales for 2023. Like Sipchem, Sabic AN expects these changes to influence its results starting from the first quarter of 2025.

The rise in feedstock prices, announced by Saudi Aramco, is expected to affect a range of chemicals and raw materials that are crucial in production processes. These materials serve as the foundation for petrochemical products, including those used in the manufacture of various polymers, chemicals, and industrial materials.

Feedstock price increases are common in the petrochemical industry, driven by fluctuations in global oil and gas prices, as well as supply-demand dynamics. Saudi Aramco, being the world's largest integrated oil company, has a significant influence on the pricing of essential raw materials for the petrochemical sector in Saudi Arabia. As a major supplier, its price decisions are closely monitored by companies like Sipchem and Sabic AN, whose business models are closely tied to the availability and cost of feedstocks.

Sipchem's stock market performance and financial results will likely be closely watched in the coming months as it adapts to the new cost structure. However, with its ongoing focus on cost optimization and operational efficiency, the company is poised to manage the impact of the price increase and maintain its competitive position in the market.