Saudi Basic Industries Corporation (SABIC), a Fortune 500 company that emerged in the Arabian Peninsula, is increasingly relying on the Chinese market. As the head of this chemical giant, Yusuf Al-Bayen, the global CEO who came to China to participate in the 2017 Guangzhou Fortune Forum (hereinafter referred to as "Youssef"), expressed SABIC's vision to further expand its investment in China in the future. , He told reporters, "In the future, SABIC will concentrate on doing business in China and increase the volume of fixed asset investment in China."
It is learned from official data that China has become one of SABIC's most important strategic markets, and the Chinese market currently contributes nearly 20% of SABIC's global sales revenue. According to data released by the China Petroleum and Chemical Industry Federation, as of August 2017, China's chemical industry achieved an output value of 961.5 billion US dollars, a substantial increase of 14.2% year-on-year. From this perspective, the Chinese market has sufficient potential and momentum to continue to be the growth engine for SABIC's global business development.
Saudi Basic Industries Corporation (SABIC) is the world's leading diversified chemical company headquartered in Riyadh, Saudi Arabia. Globally, SABIC is the fourth largest chemical company after BASF, Dow and other multinational giants. In 2016, SABIC's net profit reached 17.8 billion riyals (4.8 billion U.S. dollars), and its sales revenue totaled 132.8 billion rials (35.4 billion U.S. dollars), ranking 299 in the 2017 Fortune Global 500 list . As of the end of 2016, SABIC's total assets reached 316.9 billion riyals (84.5 billion U.S. dollars). In 2016, SABIC's total production reached 72.7 million metric tons. At present, the Saudi Arabian government owns 70% of SABIC's shares, and the remaining 30% are publicly traded on the Saudi Arabian Stock Exchange.
Continue to focus on the Chinese market
Starting from just one business representative office, after 35 years, SABIC has now built an advanced R&D center in Greater China, with factories in Shanghai, Guangzhou, and Chongqing, and has 14 The city conducts business.
The total number of employees exceeds 1,500, and the total investment in fixed assets exceeds US$1.8 billion.
Yusuf used a set of data to show that China will remain an important investment destination for SABIC in the future: In 2017 and 2016, China has achieved growth in foreign direct investment (FDI), which further confirms that China’s current investment environment is still correct. Foreign-funded enterprises have great appeal. In addition, of the top 500 companies with the largest market capitalization listed on the New York Stock Exchange, 50% of them have operations in China, and 41% of the total revenue of these companies comes from the Chinese market.
The strong data support makes SABIC full of confidence in the Chinese market. Yusuf told reporters, “We will continue to make commitments to increase SABIC’s development in China and further expand its business in China.” According to Yusuf, SABIC’s future investment in China will focus on several major issues. The core products include the business of polyethylene, polypropylene, methanol and ethylene glycol, and polycarbonate.
At present, this chemical company from Saudi Arabia has previously completed a joint venture with Sinopec Group. In 2009, Saudi Basic Industries Corporation and China Petroleum & Chemical Corporation announced a joint venture to build Sino-Saudi Arabia (Tianjin) Petrochemical Co., Ltd. (SSTPC), with an annual output of 3.2 million tons of chemical products, which had been put into full production on May 8, 2010. It has also reached a principled agreement with Shenhua Ningxia Coal Industry Group Corporation and the government of Ningxia Hui Autonomous Region on further promoting the construction of joint ventures. In the future, it is expected to build a joint joint coal chemical comprehensive plant.
Saudi Basic Industries, which has successively won the two large-scale orders of Sinopec and Shenhua Group, has attracted the attention of the industry. From the current point of view, SABIC is continuously expanding its business into China.
On December 8, SABIC just signed a memorandum of understanding with Guangzhou Nansha Development Zone on further cooperation. SABIC's Nansha plant in Nansha Development Zone, Guangzhou was established in 1994 with a total investment of US$248 million. At present, the plant has become SABIC's largest mixing plant in Asia and occupies an important position in the entire industrial chain of China and the world. The signing of this memorandum makes Guangzhou Nansha the first choice for SABIC to consider further expansion of investment in China.
The success of a multinational company often depends on the performance of several key markets. In particular, SABIC strives to become the world’s third largest petrochemical company by 2025. Obviously, from the perspective of Yusuf’s global business landscape, revenue accounts for total revenue. 18% of the Chinese market is very important.
Survival in cyclical industrie
Relying on the outstanding performance of key markets means that SABIC will make large-scale, long-term asset investments in key markets such as China and the United States. The reporter learned from SABIC officials that SABIC currently has three major long-term investment projects in progress, including the OTC project that SABIC and Saudi Aramco conducted for the direct production of chemicals from crude oil, and SABIC and Exxon Mobil in Texas, USA. An ethylene cracking project with an annual output of 1.8 million tons was established, as well as a coal chemical project with Shenhua Ningxia Coal Industry Group in China.
Will launching multiple investment projects at the same time bring greater financial pressure to SABIC? Because the chemical industry has a cyclical nature, how to ensure the steady growth of a chemical company and balance the relationship between long-term investment planning and cyclical unpredictable factors It is not easy.
As the head of the Fortune Global 500, Yusuf obviously has his own experience. He told reporters that in order to minimize the uncertainty caused by this challenge, SABIC often chooses low points to implement bargain-hunting investments and wait for the industry to pick up and make profits. . "We have made many successful attempts in this regard. We can't say 100% success, but at least a 75% success rate can be achieved." Yusuf said.
As a multinational company, SABIC has operations in more than 50 countries around the world and has approximately 35,000 employees. SABIC has manufacturing plants all over the world, including the Americas, Europe, the Middle East and the Asia-Pacific region. In Yusuf's view, this is not only an inevitable choice for the company's global business expansion, but also one of SABIC's methods to deal with cyclical fluctuations in the industry. Yusuf told reporters that because different markets such as China, Saudi Arabia or the United States have time differences in responding to cyclical fluctuations in the industry, SABIC chose to diversify its assets worldwide to minimize cyclical fluctuations to the company's normal Operational risks.
In addition to macro-strategic choices, SABIC will also start from a more technical level in response to cyclical fluctuations. "We need to further increase SABIC's business in special fine chemicals, because bulk chemicals are more susceptible to the cyclical fluctuations in the price of crude oil and other energy sources, resulting in large fluctuations, while fine chemicals have relatively small fluctuations, which can reduce cyclicality. The impact of volatility on SABIC’s business.” In addition, Yusuf also values the strategy of SABIC’s diversification of raw materials. He told reporters, “Now SABIC mainly relies on natural gas, and will introduce shale gas and coal in the future. This way we can fully Make good use of the fluctuations in the price of each raw material, so as to reduce the impact of market raw material prices on SABIC's production and operation."
As a global chemical giant, SABIC's strategy to deal with cyclical fluctuations in the industry is undoubtedly worth learning. However, knowing is easy and difficult. At the end of the interview, Yusuf told reporters, “Speaking of words, this is a very delicate, very complicated and very good strategy, but it is not so easy to implement for the world’s top 500 companies. ."
