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Saudi Arabia's petrochemical landscape is undergoing significant shifts as state-owned refiner Saudi Aramco raised domestic ethane feedstock, marking a 43% increase from $1.75/mn btu to $2.50/mn btu effective January 1, 2024. 

This decision, the first since December 2015, is poised to elevate production costs, prompting Saudi petrochemical producers to anticipate an annual cost increase ranging from 0.9% to 3.4%. Expectations of further price increments, potentially settling at $3.50/mn btu (which is $1/mn below US ethane prices) raise concerns about potential competitiveness loss in the export markets. 

A Saudi PE producer complained, “We might no longer be able to offer competitive offers to international buyers without compromising our margins.”

Besides lifting ethane prices, Saudi Aramco also raised local diesel prices by 53 cents to $0.3067/litre ($48.70/barrel). Transportation costs are expected to surge as a result. 

The hikes in feedstock and delivery costs come at a rather unfortunate timing as many Saudi Arabia producers struggle to cope with a persistently weak demand and heightening shipping challenges stemming from the Red Sea tension. 

1 million BTU = 0.25 tons