Saudi Basic Industries Corporation (SABIC) [2010.SE] announced that it has signed a memorandum of understanding (MoU) as of 30 May 2016 with Shenhua Ningxia Coal Group (SNCG) for studying the development of a petrochemical complex that will rely on coal as a feedstock, which will be supplied by SNCG. According to the announcement, the MoU will include the option for both companies to enter a joint venture for the new petrochemical complex, which will be situated in the Ningxia province. The establishment of the proposed project will rely on the results of study and the receiving of the necessary regulatory approvals and technical licences. The announcement also sets in place the time-frame for the project to be completed within three years from the date of the MoU. We would view such a project positively - if it were to go through – as coal-based producers in China have been very competitive vs. global peers in the past few years. Based on the latest data from IHS, a coal-based producer in China would currently have a cost of production of around USD550/tonne of light olefins, which would still allow for a significant margin today (current ethylene price is cUSD1075/tonne). (Tadawul, Yousef Husseini)   SABIC: SAR80.00 as of 30 May 2016, Rating: Neutral, FV: SAR90.00 per share, MCap: USD64,000 million, SABIC AB / 2010.SE