The 50-50 joint venture, expected to be named NATPET-Schulman Engineering Plastic Compounds, will produce and globally sell polypropylene compounds. The joint venture is planning to build a polypropylene compounding plant in Yanbu, Saudi Arabia, where it expects to begin production by the end of 2014.
A. Schulman's initial equity investment in the relationship is approximately $14 million. Initial project costs, including construction of the facility, infrastructure needs as well as working capital requirements are approximately $70 million. Beyond the initial equity investment by the partners, the joint venture intends to take advantage of various low-interest loan options provided by the Saudi Industrial Development Fund and other lending institutions.
The joint venture will manufacture a line of customer-preferred engineered plastic compounds based on A. Schulman technology. NATPET, a well-established petrochemical producer in the region, will provide the joint venture with its regional infrastructure as well as its high-quality polypropylene resin.
The joint venture's new plant will enable A. Schulman and NATPET to serve a broad range of customers in the Middle East, Africa and India to capitalize on the growing demand for durable goods and transportation products. All sales outside of these regions will be sold directly through A. Schulman.
In addition to the joint agreement, NATPET also agreed to enter into a distribution agreement, where A. Schulman will, effective immediately, distribute polypropylene resins for NATPET in Europe to specified customer segments.
"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," says 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."
"By partnering with NATPET, our Company has the ability to add significant value to our supply chain as well as broaden NATPET's global exposure. As our Middle East markets continue to grow, we believe a strong presence in the region will be critical to achieving our goal of becoming the number-one niche engineered plastics manufacturer globally," says Pojhan Vahabi, Business Director Middle East.
"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," says Marwan Nusair, President of NATPET's owner Alujain Corporation.
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."-[email protected]