A. Schulman, an Ohio-based compounder with a major European technical presence, has entered into a joint venture agreement with National Petrochemical Industrial Co. (NATPET) of Jeddah, Saudi Arabia to produce and globally sell polypropylene compounds. The joint venture is planning to build a polypropylene compounding plant in Saudi Arabia where it expects to begin production by the end of calendar-year 2014.
A. Schulman’s initial investment is approximately $14 million. Initial project costs, including construction of the facility, infrastructure needs as well as working capital requirements are approximately $70 million based on current exchange rates. The joint venture will manufacture a line of engineered plastic compounds based on A. Schulman technology. NATPET will provide the joint venture with its regional infrastructure as well as polypropylene.
“Several aspects of this deal will accelerate A. Schulman’s expansion and visibility in its priority growth markets of Africa, India and the Middle East while better serving our existing global customers with high-quality polypropylene compounds,” said Bernard Rzepka, general manager and chief operating officer of A. Schulman, Europe, Middle East, Africa. “At the same time, these actions will allow us to serve global customers more effectively by creating an efficient, cost-effective and state-of-the-art manufacturing facility in the Middle East.”
The JV continues the downstream movement of Saudi Arabia’s plastics industry, which was launched in the late 1980s near the Kuwaiti border with state-of-the-art plants that produced plastic resins from natural gas that had been flared. The most dramatic manifestation of the trend was SABIC’s acquisition of GE Plastics for $11.6 billion in 2007. SABIC has broadened the focus of the Innovative Plastics group to also include polypropylene produced in Saudi Arabia.
Referring to the NATPET/Schulman JV, Marwan Nusair, president of Alujain (NATPET’s corporate parent), said: “This joint venture furthers NATPET’s vertical integration plan. It is a crucial enabler of creating further downstream projects by providing the key ingredients to manufacture auto and appliance parts in the Kingdom.”
Jamal Malaikah, president of NATPET, commented, “The project supports the Saudi government’s program in developing downstream projects and adding value to the intermediary petrochemical production in KSA. It will create employment opportunities for Saudis and bring new technology to the Kingdom. We are proud to have joined hands with a leading player in the engineering plastics compounds business.”