Saudi Chemicals: The eroding Saudi cost advantage

Research evidence excerpt

Saudi Chemicals: The eroding Saudi cost advantage

Equities ● Chemicals

15 July 2026

Eroding cost advantage

◆ Feed slate shift is the story with ethane falling from dominant to

under half the mix, pushing costs structurally higher

◆ Relative competitiveness has worsened on falling US gas costs;

rising Saudi costs has also narrowed gap to Asia

◆ Lighter crackers + liquids benchmark reset could cut feedstock costs

by cUSD80-100/t, restore profitability and improve returns

The Saudi cost disadvantage

Two decades of eroding competitiveness

No, that’s not a typo. The much-vaunted Saudi chemical cost ‘advantage’ has eroded away over

the last two decades via a combination of heavier slates, market linked feeds, rising costs and

shrinking discounts. At the same time, falling feedstock costs in competitor regions such as in

the US has meant that as US shale has reset the cost curve, the Saudi industry hasn’t kept up

and today operates at an active cost disadvantage vs the US. The gap to marginal cost

producers in Asia has also shrunk.

We have written about this topic extensively in the past, when talking about the declining

competitiveness of the Saudi industry, see Saudi feedstock value capture, or lack thereof,

19 Nov 2024 and Another feedstock price increase further erodes competitiveness, 8 Jan 2025.

What we do differently in this note is chart out a timeline for 40 years of cumulative Saudi

ethylene production, going through the start-up dates, product and feedstock slates for all 16

crackers in the Kingdom.

Saudi Arabia aggregate ethylene feedstock slate (1985-2026) (000 tons)

35,000

30,000

25,000

20,000

15,000

10,000

5,000

1985 1990 1995 2000 2005 2010 2015 2020 2025

Ethane Propane Butane Naphtha

Source: S&P Global, WoodMac, HSBC