Down the Stream

NATPET began as a distinguished producer with key advantages in the sector. What is the background to your growth and diversification?

We specialize in the production of polypropylene. We chose this particular polymer product because there is high demand for it around the world—close to 62 million tons per year. Additionally, annual growth in demand is around 4%, or an additional 2.5 million tons per annum. This product goes into industries like car manufacturing, construction, packaging, food packaging, health and home appliances, and more. It is a versatile product that is in high demand. Although NATPET was only commercially operational toward mid-2010, we decided to go further downstream almost immediately—a sound strategy for a number of reasons. We no longer depend solely on a commodity product that would leave us open to price fluctuations caused by macroeconomic shifts. For example, our first joint venture is with a British listed company, Low and Bonar. Our product is geotextiles, which primarily go into infrastructure projects like roads, rail, buildings, airports, seaports, and more. We also went into partnership with an American company, A. Schulman, a significant player in the field of polypropylene compounding. The process makes our product useable in many different applications such as cars and home appliances. This project is under construction and will be operational by 3Q2017. The other reason we went downstream was to meet the government’s objective of diversifying income, adding value, and creating more employment opportunities for Saudi nationals. Moreover, we recently invested USD15 million in an American company, Siluria Technologies, which is working on new technologies to produce petrochemicals. For a company of our size and a short history of seven years, this is a major step forward. It shows that we are thinking of the future and taking early steps to benefit from the technological developments happening in our field.

Chinese consumption has slowed in recent months. Has that trend or other macroeconomic changes affected your business?

We sell to 70 countries per year on average. That protects us from any economic issues with one specific country, like China, or region, like Europe. However, we are not fully protected; when China sneezes everybody gets a cold. When it started to have problems last year with lower GDP growth, the effect on us and everyone else was clear. Less demand in the Chinese market means products will be diverted into other markets, reducing everyone’s margins. We have seen that the world is not only volatile in geopolitics, but also in economics. Europe has low GDP growth, China’s growth is lower than earlier years, and many emerging markets are facing problems as well.

What is your outlook for next year, and what are your plans?

We have invested in two downstream ventures, an American company for new technologies, and are looking for other ideas. We are finding it difficult to invest in local expansion or new petrochemical projects due to the above reasons. Our Saudization rate is 60%, which is excellent for a company such as ours. We are also engaged in social programs, and have won the King Khalid Foundation award four times. We are proud of what we do for society.