Cyclic petrochemical markets and Pequiven strategy

The last message given by the SABIC Europe's CEO before the unification of all the SABIC organization was very clear:

"Although everybody knows that petrochemicals is a cyclical market, it still strike me the fact that we keep repeating the same mistakes over and over, building a plant during high poliolefins prices, and commisioning the plant when prices are low".

For me, that sentence describes exactly Pequiven's strategy. But first let's take a look of a typical cyclical behavior, and some advise of investment:


If you change the x-axis by years, you can easily spot where you should have invested, how much time you should spent building your plant to take maximum profit of your investment (risk is present, but under control).

Now lets take a look of Pequiven's strategy:



All investments were made when the oil (and therefore immediate intermediates) were over the 100 USD line, just at the top of the hill. Then, not surprisingly, prices tumbled and all investments stopped. And now, when oil prices are recovering, the Pequiven's investments are being resumed, as commented on the previous post.

This information is not at all a secret, and still many companies make this error, and regrettably Pequiven is among them.

Unilever's sustainability programme - Watch and learn

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Last week Unilever presented its 10-year sustainability programme.
I heard that Unilever will not look anymore for short-term revenues, it will only focus in long term sustainability. This line of thought is based on the fact that it is not sustainable an ever-growing company.

The efforts are also connected to carbon footprint, water usage, waste management, energy efficiency and many other areas. Even Unilever wants to face the challenge of providing enough quality food for the BRIC countries (Brazil, India and China).

At first sight, Unilever's effort seems to me completely revolutionary and innovative (also P&G has similar sustainability programs), but after a closer look... In my opinion this is what national companies have been doing for the last 50 years.

The main issue of this post is: nowadays the private companies want to behave as a public owned company!!!

Lets take a look to PEQUIVEN and SABIC, two national petrochemical companies, which business is somewhat similar to Unilever, in the sense of providing solutions to end-customers needs.

The purpose of this companies has never been financial performance but provide a sustainable future for their stakeholders (in this case the coming generations of Saudi Arabia and Venezuela). To achieve this objective it has been necessary to invest against general opinion (low term revenue), taking the risk of financial exposure.

The end result is far from being clear, but my expected outcome is that they will behave as a cashcow during the bad times, and as a commercial success on the good ones.

Finally nothing more to be said than good luck to Unilever.

They are not random news, its a trend

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Petrochemicals project all around the world are being reconsidered or cancelled.

We hear that in Saudi Arabia project in Ras Tanura is being downsized and possible changed to a different location.

We also hear that in Qatar the Honam quits a 2.63 bln project planned. The excuse? Global financial crisis.

So, my thoughts about it... The same as latest SABIC Europe CEO, in its last speech before leaving the company: "The chemical business is a cyclical one, everybody knows it, but yet it strikes me how many people still don´t understand this situation and act according to it".