Higher feedstock and fuel prices introduced in Saudi Arabia are likely to play a part in funding the kingdom’s trillion-dollar Vision 2030 programme, according to a leading ratings agency.
From the start of the month, the price of methane, the main component of natural gas and commonly used as a fuel in cement kilns, rose to $0.5 per 1 million British thermal units (MMbtu).
Ethane, which is mainly used as a feedstock in the petrochemical sector to make plastics and other chemicals, rose to $0.75 per MMbtu.
The price of diesel has also gone up by 44.3 percent, to $0.44 per litre, which will have an impact across many sectors in the kingdom.
Saudi Arabia is at the sharp end of its Vision 2030 programme, with just under five years to go before its target for delivery, which includes more than $1 trillion worth of projects designed to wean the country off a dependence on hydrocarbons.
“Higher feedstock and fuel prices would help reduce subsidy costs for the government, with those savings potentially redeployed to Vision 2030 projects,” the report from S&P Global Ratings said.
The last time prices were increased was more than a year ago, on January 1, 2024.
A previous note from Riyadh-based market analysis company Sico Research said the impact of the price rises on petrochemical companies would be “small and could be offset by movement in product prices”.
This was backed by the report from S&P, which said production costs would undergo a “marginal increase”, although it conceded the price rise “could significantly affect wider Saudi corporations’ profit margins and competitiveness”.
“Saudi Basic Industries Corp, Almarai, and Saudi Electric Co can manage the higher costs, with no meaningful impact on credit quality,” it said.
Experts had previously warned the increase would be most keenly felt by cement companies operating in the country.
Matt Myers, assistant professor in real estate at Heriot-Watt University Dubai, said the increased costs could lead to developers reassessing feasibility models, exploring project redesigns or considering alternative building materials.
“As developers seek cost-effective solutions, they may turn to supplementary cementitious materials [used in partial replacement of cement in concrete], or innovative technologies like carbon capture and storage. These alternatives not only align with global sustainability goals but also offer long-term economic and environmental benefits,” he told AGBI.
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