Chemical giant Saudi Basic Industries Corp (SABIC) has cut output at its European plants as global demand falls with the slowing economy, SABIC's chief executive said on Wednesday. “We have reduced (production) in Europe,” Chief Executive Mohamed Al-Mady told Reuters on the sidelines of a petrochemical conference in Dubai. Mady declined to give details on how much SABIC had cut output or for which products. The firm produces petrochemicals, plastics, fertilisers and steel. According to its website, SABIC supplies European markets with plastics, such as crystalline PET and low density polyethylene, and chemicals such as benzene and ethylene. SABIC Europe's production facilities are based in Geleen in the Netherlands, Teesside in Britain and Gelsenkirchen in Germany and have a total yearly production of over 8.7 million tons. The firm said in July that it would close a unit at the Teesside aromatics plant by end-2008 as it had become uneconomical. It plans to upgrade other units at the plant. SABIC Competitor BASF, which is active mainly in Europe, said in November it would cut back production, citing a “massive” decline in demand in key industries, by temporarily shutting 80 plants worldwide and reducing production at about 100 plants. SABIC posted its first quarterly decline in profits in more than two years in the third quarter and has said that it expected the slowing economy to hit fourth-quarter results. SABIC continued to run plants in Saudi Arabia at full capacity, Mady said. “These are good investments,” he said. “They are running on indigenous feedstocks so I think their economics are good.” Meanwhile, the petrochemical industry may improve next year, helping makers of plastics and packaging improve margins as customers resume purchases, Nova Chemicals Corp. Chief Executive Officer Jeffrey Lipton said. “I am bullish,” Lipton said, when asked about the outlook for 2009 during an interview in Dubai on Wednesday. “We have started to see some stability in prices in North America and Asia.” Nova, Canada's largest chemical maker, and other producers are suffering as the double impact of high industry inventories and reduced demand from consumers lowers prices, he said. Petrochemical prices have tumbled by 50 percent or more as the global credit crisis weakens demand, Mohamed Al-Mady, CEO of Saudi Basic Industries Corp., the world's biggest chemicals maker by market value, said at a conference in Dubai. Nova said on Tuesday fourth-quarter sales may drop as much as 25 percent because of price declines and weak demand for plastics. Nova shut production of flexible polystyrene, used as packaging for consumer goods like television sets, at a plant in Pennsylvania because of the slowdown, Lipton said. “I've never seen as much production shut in voluntarily in the industry,” he said. The Pennsylvania plant is “likely” to reopen in the first quarter and Lipton said he doesn't see the need to close down more output. The global economic slowdown is hurting some companies' ability to invest by making it harder for them to borrow cash and spurring them to save for the future, Hassan Ahmed, an HSBC Holdings Plc analyst, said at the conference. That may lead to mergers and acquisitions in the industry, he said. The world's three biggest economies, the US, Japan and Germany, are in recession, cutting demand for energy and consumer goods. Nova is a “small and attractive” company and is not up for sale, Lipton said. The company hasn't received any offers and would consider any proposals, he said.
