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SABIC 2005
Vision
To be a leading global manufacturer and marketer of hydrocarbon and metal products.
To provide distinctive high quality industrial products and services to our customers, meeting the expectations of our shareholders through optimum utilization of our available human and natural resources together with the use of state-of-the-art technology - maintaining safe and environmentally sound practices .
Mission
SABIC Today Established in September 1976 to
spearhead Saudi Arabia’s industrialization beyond oil.
One of the top 10 diversified chemical companies in the world.
Produces and markets globally superior quality chemicals, fertilizers, polymers, fibers and metals to more than 100 countries.
A family of 18 world-scale industrial complexes in Saudi Arabia, two complexes in Netherlands and Germany, and interests in offshore industrial ventures.
SABIC Today (Contd.)
International recognition and awards for being amongst the safest in the industrial sectors in which we compete.
Largest industrial R&T complex in the Middle East.
Provides high-level customer services through 12 international affiliates and our European operations.
Shared Services
Petrochemical Coordination
Fertilizers MetalsBasic Chemicals
Inter-mediates
Poly-olefins
PVC & Polyester
Strategic Business Units
Vice Chairman
FinanceControl
R& T HR
Corp. Core
SABIC Organization
Production Growth(Million Metric tons)
6
10
17
28
43
64
0 20 40 60 80
1985
1990
1995
2000
2004
2008
Productivity per Employee (per Metric tons)
1050
1170
1450
1950
2680
0 1000 2000 3000
1985
1990
1995
2000
2004
Sales Volume (Million Metric tons)
5
11
17
21
34
0 10 20 30 40
1985
1990
1995
2000
2004
Sales Revenue(Billion US Dollars)
0.5
4
6
7
18
0 5 10 15 20
1985
1990
1995
2000
2004
Total Assets (Billion US Dollars)
6
9
16
24
33
0 10 20 30 40
1985
1990
1995
2000
2004
Metals
Intermediates
FertilizersPolyolefins
PVC & Polyester
Basic Chemicals
Total Production
12%
8%
18%
44%
2%
16%
The World of SABIC
SABIC 100%SABIC 100%SABIC 100%
SABIC 75%
Pension General Organization 15%
General Organization for Social Insurance 10%
SABIC 100%
SABIC 100%
SABIC 90%
Fobak 10%
SABIC 41%
SAFCO Employees 10%
Private SAFCO and Al-Jubail
Shareholders 49%
SABIC 50%
Al-Jubail Chemical Fertilizer Co. Taiwan
Fertilizer Company 50%
SABIC 57.17%
Private Sector 42.83%
The World of SABIC
SABIC 50%
Exxon Mobil 50%
SABIC 50%
Exxon Mobil 50%
SABIC 70%
Neste Oy-Finland 10%
Ecofuel-Italy 10%
Saudi-European Petrochemical Co.
Arab Petroleum Investment Corporation
APICORP 10%
SABIC 50%
Celanese 25%
Duke Energy 25%
SABIC 50%
SAFCO National Chemical Fertilizer Co. 50%
SABIC 50%
Shell Oil Co 50%
SABIC 70%
National Industrial Gases Co. and Yanbu Industrial Gases 30%
SABIC 50%
Japanese Eastern Petrochemical Company
led by Mitsubishi Corporation 50%
SABIC 50%
Japanese companies led by Mitsubishi Gas Chemical Co. 50%
SABIC 51.7%
15 Saudi Arabian and Regional Arabian
Industrial Fibers Co Private Sector partners 48.3%
Vital statisticsEthylene
Secular growth: ~4%
Global capacity: 250 bn lbs/yr
Average revenues: $55 bn
Average EBITDA: $20 bn
Estimated value: $90 bn
Natural state: Gas
Propylene*
Secular growth: ~5%
Global capacity: 125 bn lbs/yr
Average revenues: $25 bn
Natural state: Gas
* for chemical uses
Collectively 6% of global chemical sales; closer to 15% in terms of major downstream (derivative) product equivalents
Source: Goldman Sachs Research, SRI
1
What does it cost to build plants from scratch?
33 3540
43
5054
0
10
20
30
40
50
60
Eth
ane
Eth
ane/
Pro
pane
Pro
pane
But
ane
Nap
htha
Gas
Oil
Cap
ital
co
st,
c/lb
eth
ylen
e
Costs for greenfield builds:
•Brownfields range from 70%-85% of greenfields•Debottlenecks range from 30%-60% of brownfields
Source: Chemical Data, Goldman Sachs Research
What’s downstream?
Polyethylene55%
PVC15%
Ethylene glycol12%
Alpha olefins6%
Polystyrene5%
VAM3%
Others4%
2001
Polypropylene63%
Acrylonitrile10%
Oxos9%
PO7%
Acrylic acid4%
Other4%
Cumene3%
Ethylene Propylene
The growth disconnect: Polypropylene (PP) is outpacing polyethylene (PE) by about 150 bps
Source: Goldman Sachs Research, CMAI
Where do they show up eventually?
Ethylene
PE: Packaging (shrink wrap, tupperware), fabricated parts (buckets, trash cans, pipes), wire and cable insulation
PVC: Housing & construction (pipes, siding, window profiles, fencing, decking), wire & cable insulation
Glycol: PET resin - packaging (beverage/water bottles); Polyester fiber - apparel, carpets; antifreezeAlpha-olefins: Detergents, consumer products
Polystyrene: Hard goods, packaging, insulation
VAM: Coatings (paints), adhesives
7
Where do they show up eventually?
Propylene
PP: Packaging (cheaper alternative to PET resin, bottle caps), hygiene products (diapers), carpets (cheaper alternative to nylon), fabricated parts
Acrylonitrile: Apparel (acrylic, nylon), autos (nylon, ABS), synthetic rubber, carpeting (nylon)Oxos: Plasticizers (make PVC flexible), coatings
PO: Autos & furniture (polyurethane foams); apparel (spandex), aviation antifreeze (propylene glycol), pharmaceuticals, autos (BDO/PBT)
Acrylic acid: Coatings (paints)
Cumene: Autos, CDs, DVDs, electronic equipment (polycarbonate), construction (phenolic resins)
Ethylene economics: Producing cheap is necessary but not sufficient
0
5
10
15
20
25
30
Eth
yle
ne
pro
du
ctio
n
HD
PE
con
ve
rsio
n
Bag
gin
g/log
isti
cs
Oce
an
fre
igh
t
Inla
nd
fre
igh
t
Tari
ff
De
live
red
Co
st,
c/l
b e
thyle
ne o
r H
DP
EPlant level Add-ons
10.6
8.21.5
3.01.5
1.8 26.6
US naphtha-based HDPE delivered to China*:
Add-ons account for 30% of the costs on averageAssumes ~$20/bbl average price for crude oil
Source: Goldman Sachs Research
9
Ethylene economics: Cheap feedstock and market proximity are the optimal combination
Competitive positioning vis-à-vis the Chinese market:
Note: US (N) = US naphtha-based; US (E): US ethane-based
-25
-20
-15
-10
-5
0
Mid
Ea
st
Ch
ina
Alb
ert
a
Ma
lays
ia
Ta
iwa
n
Sin
ga
po
re
US
(N
)
Ko
rea
US
(E
)
W. E
uro
pe
Jap
an
Dis
ad
van
tag
e to
co
st le
ad
er,
c/lb
Average Current
Middle East (cheap feedstock), China (location) and Alberta (a bit of both) are ahead
Source: Goldman Sachs Research
Implications: The Middle East and Asia continue to grow preferentially in ethylene
0%
20%
40%
60%
80%
100%
1980 1985 1990 1995 2000 2005E
Glo
bal
cap
acit
y sh
are,
%
US/Canada Europe Asia Mid East/Africa Latin America
Source: Goldman Sachs Research, SRI
Market participants: Who are the majors?Ethylene
bn lbs share Dow 23.6 9% Exxon Mobil 16.8 7% Shell 13.3 6% SABIC 11.8 5% Equistar 11.7 5% BP 8.6 4% Chevron Phillips 7.8 3% Formosa 7.0 3% NOVA 6.6 3% BASF 5.2 2%
Propylene
bn lbs share Exxon Mobil 8.4 6% Shell 7.6 5% Equistar 5.0 3% BP 4.8 3% Dow 4.7 3% Enichem 2.9 2% Chevron Phillips 2.9 2% Formosa 2.7 2% Total Fina 2.3 2% BASF 2.3 2%
Top 10 make up less than 50%; no outsized playerSource: Goldman Sachs Research, SRI
What’s the supply outlook for key products?
0%
2%
4%
6%
8%
10%
'00 '01 '02 '03E '04E '05E
Glo
bal s
uppl
y gr
owth
, % y
oy
Ethylene PE Glycol
0%
2%
4%
6%
8%
10%
12%
'00 '01 '02 '03E '04E '05E
Glo
bal s
uppl
y gr
owth
, % y
oy
PP PO
Ethylene chain: Propylene chain:
2003 and 2004: Relatively quiet years; for ethylene, 2005 too
Source: Goldman Sachs Research
17
SABIC around the World
SABIC Headquarters
SABIC Research & Technology
Distribution and Storage Facilities
Jubail
Suez Canal
Vadodara
Mumbai
New Delhi
Chnnai
Hong KongSingapore
Jakarta
Shanghai
Taipei
Ulsan
SakurajimaTokyo
Namikata
Lavera
Barcelona
Marseille
Livorno
Rome
Malta
MilanBologna
LondonFelixstowe
Gainsborough
HoustonWilmington
Payne
Los Angeles
AntwerpRotterdam
Essen
Wallhamn
Moscow
Paris
Gebze
Manila
SittardGelsenkirchen
SABIC Manufacturing Sites
SABIC International Subsidiaries & Sales Offices
Mer
New Jersey
Seoul
RiyadhDammam
YanbouBahrain
Dubai, Jabal Ali
Geleen
Dusseldorf
Imam Port
Istanbul
Business Opportunities in Saudi Arabia
• Largest market in the Gulf Cooperation Council states (GCC)
• Some 3,700 factories• 26 industrial cities• Land at reasonable prices• Modern utilities and infrastructure in industrial cities• Royal Commission for Jubail and Yanbu• Saudi Industrial Development Fund (SIDF) and
commercial banks• Between 2.5% to 5.5% SIDF contribution toward
consultancy fees for business case research and assessment
Business Opportunities with SABIC
•SABIC’s supply of value added products stimulated an embryonic growth in the local downstream industry
•1980’s - fewer than a 100 plastic converters• 2002 - over 500, a 437% increase • 1986 - 41kmt of plastics consumed• 2002 – 770kmt , a 1700% increase• Value addition upstream stimulates further value
addition downstream.
Business Opportunities with SABIC
150 projects downstream using SABIC products. SABIC is the feedstock supplier and also offers R&T support.
8 examples:• Amino Resins• Linear Alpha Olefins Sulphanates• PolyAlpha Olefin Sulphanates• Safety Chairs for Children• Toluene Disocyanate (TDI)• Alkyd resins• Paraformaldehyde• Polyether Polyols
Business Opportunities with SABICAmino Resins
Applications: Major adhesive for production of plywood, waferboard, tranndboard and particle board
Demand: 30,000 mt/yMarket: Industrialized countries in western
Europe, Japan, U.S.Capacity: 32,000 mt/y combining urea or melamine
with formaldehydeCapital Investment: US $32.5 million Funding: Equity; SIDF loan; Commercial bank loanManpower: 17 workmenReturn on Investment: 11.63%Pay Back: 9 years
Business Opportunities with SABICAmino Resins (cont)
Materials: 23,700 mt/y forlmaldehyde; 21,720 mt/y urea; 2,000
mt/y melamine
Manufacturing: Amino resins are made both by batch
and continuous process, according to process the
planned sales products as special or general purpose
amino resins. Important mole ratio factors are – mole
ratio of reactants; catalyst, pH or reaction mixture,
reaction time and temperature.
Business Opportunities with SABIC
Linear Alpha Olefin Sulphanates
Application: Soap additive
Market: Regional and international
Capacity: 20,000 mt
Capital investment: US $14 million
Funding: 75% loan; 25% equity
Manpower: 20 workmen
Return on Investment: 31%
Pay back period: 3 years
Material: C12-C18
Manufacturing process: Sulphanation of LAO
Business Opportunities with SABICPolyAlpha Olefin Sulphanates from Decene-1
Application: Oil base for high performance
Market: Regional and international
Capacity: 15,000 mt/y
Capital investment: US $38 million
Funding: 75% loan; 25% equity
Manpower: 22 workmen
Return on Investment: 34%
Pay back period: 3 years
Material: Decene-1
Manufacturing process: Linear branching with catalyst
Business Opportunities with SABICSafety Chairs for ChildrenCapacity: 450,000 units/year
Capital investment: US $6.114 million (SR 22.87
million)
Funding: 50% equity; 50% SIDF loan
Manpower: 110 workmen
Raw materials: Polypropylene, High density
Polyethylene
Internal rate of return: 26.5%
Break even point: 26.6%
Pay back period: 5 years
Annual sales: US $18.85 million (SR 70.5
million)
Manufacturing method: Injection molding, blow molding
International companies producing machinery:
Seokyung Engineering, Seoul,
Korea Permanent ARC Mold,
Taiwan
Business Opportunities with SABICToluene Disocyanate (TDI) (Aromatics Chain)
Products: Flexible foam for furniture, bedding
Applications: Used in the production of polyurethane systems, primarily
flexible foam for furniture, bedding and other
applications
Demand: KSA’s demand is projected to grow around 8% per annum.
Over 75% of the demand is in the main industrialized
regions, some consumption is dispersed throughout
developing countries. Local GCC consumption is around
7,000 tons with good growth prospects.
Market: KSA, GCC, U.S., Japan, Western Europe
Capacity: 22,000 mt/y
Manpower: 62 workmen
Materials: 0.6580 tons Toluene; 0.9500 tins Nitric Acid; 0.11 tons
Hydrogen; 0.96 tons Chlorine; 0.4250 tons carbon monoxide,
catalyst chemicals
Business Opportunities with SABICToluene Diisocyanate (TDI) (Aromatics Chain) Cont
Manufacturing process: Toluene diisocyanate is
currently produced by three unit processes:
nitration of toluene to dinitrotoluene; reduction of
dinitrotoluene to toluene diamine; phosgenation of
toluene diamine to toluene diisocyanate
Recommendation: The following firms have competitive TDI
technology (joint venture basis):
Allied Chemicals Nippon Soda ICI
Bayer Olin
Tolochemie
DuPont Rhone Poulenc
Mitsui Toatsu
Mitsubishi Chemical Union
Carbide
Business Opportunities with SABIC
Alkyd Resins (Aromatics Chain)
Products: Paints
Applications: Used in paint production, mainly for exterior quality
products
Demand: GCC 11,000 mt/y and growing
Market: KSA; Kuwait; US; Europe
Capacity: 5,000 mt/y
Capital investment:US $7 million
Manpower: 21 workmen
Materials: 0.1865 tons PAN; 0.1040 tons Glycerine; 0.3145 tons
Linseed oil; 0.1600 tons Xylene; 0.2950 tons white
spirit
Business Opportunities with SABICAlkyd Resins (Aromatics Chain) cont
Manufacturing process: The production of alkyd
resins involves the sterification of polyhydric
alcohol and polybasic acids in the presence of
small quantities of solvent (azeotropic process).
The product is then blended with a solvent to
make the alkyd resin products.
Recommendation: Suppliers of technology include Courtaulds;
Deutsch Texaco; Hoechst; Hygrotherm (UK); ICI
Business Opportunities with SABICParaformaldehyde
Applications: Used in preparing solvent based coatings or for
reconversion to formaldehyde in places when 37%
solutions of formaldehyde are not available.
Demand: 150,000 mt/y held by a limited number of
producers with large formaldehyde interests
Market: 11,000 mt/y
Capacity: US $8.02 million (SR 30 million)
Capital investment: 30% equity; 20% commercial loan; 50% SIDF loan
Manpower: 16 workmen
Materials: Formaldehyde, process chemicals
Business Opportunities with SABICParaformaldehyde (cont)
Manufacturing process: Paraformaldehyde is
made by the vacuum concentration of 37%
aqueous formaldehyde. As concentration
increases polymerisation begins and can be
taken up to 98% when it is a white solid.
Recommendation: From a competitive point of view, formaldehyde
(as the 37% solution in water) will always be
preferred as a raw material as it is cheaper and
usually readily available locally since most
countries, especially those with large
wood/timber industries, produce formaldehyde
based on (imported) methanol.
Business Opportunities with SABICPolyether Polyols
Applications: Used in the production of
polyurethan systems, primarily flexible foam but
with rigid foam and other uses also significant
Demand: World consumption is growing to
over 2.1 million mt/y, local GCC consumption is
23,000 tons and is likely to reach 40,000 tons
Market: GCC, western europe, Japan, U.S.
Capacity: 20,000 mt/y
Capital investment: US $73 million
Manpower: 32 workmen
Materials: 0.0350 tons of Glycerine; 1.01
tons prop Ethylen Oxide
Business Opportunities with SABICPolyether Polyols (cont)
Manufacturing process: Polyether polyols
production consists of four basic process
operations – the polymerization reaction of
propylene oxide initiated with glycerine and
catalyst (KOH pellets); the neutralization of the
catalysts; the treatment of the polyol with
decoloring agents and the filtration step to
remove the other materials used in the
preceding step.
Business Opportunities with SABICPolyether Polyols (cont)
Recommendation: Potential sources of batch polymerization
technology for PO production are ARCO; Chemetics;
Pressindustria. There are two main uses for polyols
in the GCC with the largest being in flexible
polyurethane foam slabstock for the furniture and
bedding industry. The second application is in rigid
polyurethane foams for the building industry.
Foams may be supplied either in a prefabricated
form (SAPTEX) or applied on site by spraying (Al
Babtain)
Business Opportunities with SABIC
• Details on these and other projects contact our Riyadh headquarters
• Flexibility in discussing arrangements
• Your business comes first
SABIC and its Suppliers
Supply Management organization (SMO)
• Manages the supplier relationship worldwide• Database of approved suppliers with at least 1,000
active at any one time• Quality control
Join the approved suppliers list by calling SMO in Al-Jubail on the Gulf coast of Saudi Arabia
SABIC Strategy
• Consolidate, restructure and focus on core competencies
• 800,000 mt/y PE plant at PETROKEMYA• 17th affiliate – Jubail United Petrochemical
Company• Two million tons additional capacity by 2002-
2004
SABIC Strategy
•Production target of 48 million mt/y by 2010
•Constantly exploring overseas opportunities for expansion