Sabic plans $1bn plastics plant in China

Saudi Basic Industries Corporation, the world's biggest petrochemicals maker, has signed a US$1 billion deal to make a speciality plastic in China.

Saudi Basic Industries Corporation (Sabic) plans to increase its investment in China with a new plant to make the plastics used in car parts and CDs.

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Last Updated: May 18, 2011

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The company announced the US$1 billion (Dh3.67bn) venture with China Petroleum & Chemical Corporation, also known as Sinopec, at a plastics conference yesterday in Guangzhou, a Chinese manufacturing centre.

"Our strong presence in Asia reflects our ambition to be the preferred petrochemical supplier in this important region," said Mohammed al Mady, the chief executive of Sabic. "Sabic has embarked on a series of infrastructure expansions as part of our growth plans."

The planned polycarbonate plant is to be funded by a 50-50 joint venture formed in 2009 between the two companies, called Sinopec Sabic Tianjin Petrochemical Company. The joint venture began manufacturing petrochemicals in China last year.

China has emerged as the favoured location for Gulf petrochemicals companies as its population's demand for consumer goods grows. Borouge, a plastics joint venture between Abu Dhabi and the Austrian maker Borealis, opened a compounding plant in Shanghai last year and has a second one planned in the Chinese province that is home to Guangzhou.

But uncertainty over future policy may hold back overseas investment, said Michel Govaerts, the Middle East and Asia general manager for the petrochemicals unit of Total, the French energy giant. Total signed an agreement in March with a Chinese state utility to make petrochemicals from coal in China's Inner Mongolia region.

"China will inevitably continue on one side to protect the economy and to adopt regulations which we can't predict," said Mr Govaerts at a petrochemicals conference in Abu Dhabi.

"If you look historically on those mega-projects in olefins in China, they have taken quite a number of years. Why? Because you have to work within the context of a planned economy, you have to work with the authorities … so you're constrained by those aspects," he said.