Saudi Petchem H1 Split Leaves Fertilizers Ahead of Basics

Nine petrochemical companies listed on the Saudi Exchange cut combined net losses by more than 50 percent in the first half of 2026 to SR1.7 billion ($452.8 million) from about SR3.4 billion a year earlier. Four names posted profits while five stayed in the red, revealing a sharp split driven by product mix, plant reliability, feedstock costs and supply-chain hits.

The improvement came from stronger operating efficiency, better associate and joint-venture results, and lower losses from discontinued operations and impairments. Weaker equity returns, higher average input costs and lower sales volumes from supply-chain disruptions pulled the other way.

The headline cut in losses therefore masks two stories running at once. One group converted higher prices and steadier operations into black ink. The other absorbed the same market shock mainly as lower volumes and higher logistics bills, so the sector total stayed negative even after the sharp improvement.

The Split Between Black Ink and Deep Red

SABIC Agri-Nutrients led the profitable group with the sector’s highest profit. Yansab, Saudi Industrial Investment Group and Alujain also finished in the black. Advanced Petrochemical, Sipchem, SABIC, Tasnee and Saudi Kayan reported losses.

• SABIC Agri-Nutrients: about SR1.6 billion profit, down 21.4 percent
• Yansab: SR270 million, up 363 percent
• Saudi Industrial Investment Group: SR194 million, up 410 percent
• Alujain: profitable (exact H1 figure not detailed in the sector tally)
• Saudi Kayan: largest loss at SR1.29 billion
• Tasnee: SR889.1 million loss
• SABIC: about SR820 million loss
• Sipchem: SR807 million loss (per trade reports)
• Advanced Petrochemical: SR69 million loss (per trade reports)

Combined second-quarter losses for the nine fell 42.17 percent to SR2.07 billion from SR3.58 billion a year earlier. The half-year picture still left the sector overall in loss territory even after the sharp improvement.

The gap between the best and worst results is wide enough to define the half. SABIC Agri-Nutrients alone contributed roughly SR1.6 billion of profit, while Saudi Kayan’s SR1.29 billion loss almost cancelled that gain on its own. Mid-tier swings at Yansab and Saudi Industrial Investment Group show how quickly reliability and product slate can reverse a prior-year result when prices firm.

Volumes Fell While Some Prices Rose

Supply-chain challenges cut sold quantities across several producers. Higher average selling prices for most products at SABIC Agri-Nutrients and stronger plant reliability at Yansab offset part of the damage for the winners. Saudi Kayan and others cited higher average costs for certain raw materials and logistics on top of the volume drop.

G. World CEO Mohamed Hamdy Omar told Asharq Al-Awsat that performance varied by product mix, petrochemical feedstock costs, production and sales volumes, operating efficiency and exposure to global markets and disruptions. He expects a gradual but uneven recovery in the second half, with global demand, feedstock and energy costs, excess capacity, shipping disruptions and geopolitical tensions still the main variables.

Omar noted that SABIC’s losses narrowed sharply, yet much of the improvement reflected the non-recurrence of provisions and impairment charges rather than an equivalent recovery in underlying operations. Sustainable gains in operating margins, sales volumes and cash flow would signal a genuine sector recovery.

In practical terms, the half sorted companies by whether price gains cleared the volume and cost hit. Where plant uptime held and the product slate caught the firmer grades, earnings flipped or widened. Where logistics bills rose with the same volume decline, higher selling prices were not enough to keep results in the black.

SABIC Narrowed the Gap Without a Full Turnaround

SABIC reported resilient operating performance in a market shaped by geopolitical uncertainties, supply disruptions and elevated energy prices. In its second-quarter release the company posted revenue of SAR 24.81 billion and an adjusted net loss of SAR 0.38 billion in the second quarter. Adjusted EBITDA came in at SAR 3.38 billion.

In the second quarter of 2026, SABIC delivered a resilient operating performance and continued to meet its strategic priorities, navigating a market shaped by geopolitical uncertainties, supply disruptions and elevated energy prices.

Dr. Faisal M. Alfaqeer, CEO and executive board member, said the company kept focus on disciplined execution, operational excellence, portfolio optimization and selective growth. Its corporate Transformation Program delivered US$547 million in recurring EBITDA improvements in the first half, on track toward a cumulative US$3 billion annual target by 2030. Dividends of SAR 3.3 billion were announced for the half. The volume of polymers shuttled from the Kingdom’s East to the West more than doubled, using the Red Sea Express container service and partners to keep customer service reliable.

Portfolio moves continued: divestments of the European petrochemicals business and engineering thermoplastics in the Americas and Europe remained on track. A Project Development Agreement with Rongsheng Petrochemical advanced selective growth in advanced chemical materials for Asia. The SABIC Fujian complex stayed on schedule for start-up in the fourth quarter of 2026. A one-million-ton MTBE plant in the Kingdom reached commercial production.

Those moving pieces explain why the loss narrowed without reading as a full operating recovery. Non-recurrence of provisions and impairments did heavy lifting, while the Transformation Program’s US$547 million of recurring EBITDA gains and the doubled East-to-West polymer shuttle supported the underlying print. The dividend and the on-track Fujian and MTBE milestones signal balance-sheet and growth priorities running beside the still-negative bottom line.

How Red Sea Routes and Hormuz Shocks Selected Sides

Geopolitical tension around the Strait of Hormuz and related shipping constraints hit volumes for Gulf-coast producers harder while temporarily lifting product prices. Companies that could maintain output and reach markets captured higher selling prices. Those facing heavier export constraints saw inventory builds and volume declines.

Analysts speaking to Argaam in July noted that prices surged in March and April after Hormuz-related disruption fears, then corrected as conditions normalized and oil prices eased. GCC producers retained a structural cost edge from low-cost ethane feedstock versus naphtha-based crackers in Europe and Asia. That edge limited the damage from higher input costs but did not protect earnings if product prices kept falling under oversupply and weak demand.

Red Sea-coast producers faced less direct exposure to Hormuz shipping risk and could continue serving export markets more steadily. The crisis temporarily favored them over pure Gulf exporters. Inventory accumulation during the disruption now risks adding supply pressure once shipping normalizes fully in the second half.

• Temporary price spike: lifted margins for producers able to ship
• Volume and logistics hit: cut sales for others and raised costs
• Ethane advantage: still the GCC’s main structural buffer
• Inventory overhang: potential H2 headwind as routes reopen

Regional chemical trade patterns continue to evolve. Egypt’s chemical export growth in plastics and petrochemicals shows how neighboring producers have also expanded non-oil volumes, adding to the competitive backdrop for Saudi exporters.

The geography of the shock mattered as much as its size. Producers that could keep cargo moving held onto the March and April price lift. Producers tied more tightly to constrained Gulf routes booked the volume decline and the inventory build that now hangs over the second half.

1. March and April 2026: prices surged on Hormuz-related disruption fears
2. Later in the half: prices corrected as conditions normalized and oil eased
3. Through H1: Red Sea-coast shippers kept steadier export access than pure Gulf exporters
4. Into H2 2026: inventory overhang and any full return of volumes meet excess capacity

Company Results Side by Side

Official filings and the sector tally produce this H1 2026 snapshot (figures in millions of Saudi riyals; some rounded from company reports):

SABIC Agri-Nutrients detailed a net profit of 1,606 million riyals for the six months, with Q2 alone at 379 million, down 64 percent year-on-year on lower volumes and weaker associate and joint-venture contributions, partly offset by higher average selling prices. Feedstock cost increases limited the upside. Saudi Kayan reported a net loss attributable of 1,287.36 million riyals, essentially flat to slightly worse than the prior year’s 1,272 million, on lower volumes, higher raw-material averages and logistics costs despite higher selling prices and lower G&A expenses. Accumulated losses stood near 48 percent of capital.

Yansab credited higher selling prices and strong plant reliability for its surge. Sipchem and Advanced swung from prior-year profits into losses on the same volume and disruption pressures.

Read across the table, the profitable names cluster around either a nutrients-heavy slate or a sharp reliability-and-price rebound from a low base. The loss-making names share volume pressure and, in several cases, a swing from prior-year profit. Saudi Kayan’s result, still near 48 percent of capital in accumulated losses, shows how little the half’s price lift repaired a balance sheet already carrying a heavy deficit.

Feedstock Edges Protect Margins Only So Far

Low-cost ethane remains the main structural buffer for GCC producers against naphtha-based crackers in Europe and Asia. That edge limited how far higher input costs could push through the half. It did not, on its own, decide who booked a profit.

Product mix and the ability to ship still sorted the field. SABIC Agri-Nutrients combined higher average selling prices with its nutrients slate and still saw profit fall 21.4 percent on volumes and softer associate results. Yansab’s jump rested on price and plant reliability together. Saudi Kayan posted higher selling prices and lower G&A yet still widened its loss slightly once volumes, raw-material averages and logistics were counted.

Omar’s list of variables matches that pattern. Feedstock and energy costs sit beside production and sales volumes, operating efficiency, and exposure to global disruptions. The ethane advantage caps the cost side. It cannot restore tons that never left the jetty or erase an inventory build waiting for routes to normalize.

• Ethane vs naphtha: structural cost edge for GCC names versus Europe and Asia
• Price capture: available only to producers that kept output moving
• Volume and logistics: the main drag where export routes tightened
• One-off items: narrowed some losses without proving margin recovery

Inventory Overhang Meets Excess Capacity Next

The same disruption that lifted prices in March and April also left cargo stacked up. As shipping normalizes in the second half, that inventory risks returning to a market analysts already describe as carrying excess capacity. A rapid full return of GCC volumes would weigh on prices just as the temporary geo-driven spike fades.

The other path runs the opposite way. Renewed shipping friction could support another price bounce and again favor producers with steadier route access. Demand remains the softer variable in either case. Shipping-cost premiums have eased without disappearing, so logistics still colors realized netbacks even when freighter space is available.

Coface sector economists and ICIS analysts, speaking earlier to Argaam, flag fresh margin pressure in the third quarter on that mix of fading spike, moving inventories, and reasserted oversupply. Commodity chemical exposure, especially polyolefins, leaves ethane-based producers open to price erosion even while their cost position stays stronger than naphtha peers. The half-year cut in losses does not remove those H2 hinges.

Analysts See Uneven Ground Ahead

Omar at G. World sees the clearest evidence of recovery in sustained margin, volume and cash-flow gains rather than one-off items. Sector economists at Coface and analysts at ICIS, speaking earlier to Argaam, flag that margins face fresh pressure in the third quarter as the temporary geo-driven price spike fades, inventories move, and global oversupply reasserts itself. GCC ethane-based producers should still sit in a stronger cost position than European and Asian naphtha peers, yet commodity chemical exposure (especially polyolefins) leaves them open to price erosion.

Any rapid full return of GCC volumes into a market already carrying excess capacity would weigh further on prices. Renewed shipping friction could reverse that and support another price bounce. Demand remains the softer variable, and shipping-cost premiums have eased without disappearing.

The first-half numbers show the sector cut its losses in half. They also show that the cut was not shared equally. Product slate, plant uptime, feedstock base and which side of the peninsula a company sits on decided who booked profits and who is still writing large checks for red ink. That split, more than the headline percentage improvement, sets the frame for the rest of 2026.