Petrochemicals

Petrochemical price monitor 

 

- PE spreads mixed as naphtha price rose. LDPE and LLDPE prices increased 5.3-6.6% WoW while HDPE and PP prices were unchanged, implying mixed product spread against naphtha (+1.3% WoW). According to an industry source, demand for PE/PP in the region recovered, with supply constraints due to maintenance shutdown. This is likely to drive product prices up in the coming week, in addition to higher feedstock cost. Spread for non-integrated PE producers improved 17-41% WoW, mainly for LDPE which is facing more supply constraints and better market sentiment in the region. 

- Aromatics producers affected by weak BZ price/spread. PX price rose 4.2% WoW to a 12-week high, driven by higher naphtha cost and improved demand for downstream products, PET and polyester. PX-naphtha spread rose to a 5-week high of US$394/t. Still, both price and spread remain far below 4Q14 levels. Worse still, aromatics producers were hurt by weaker BZ price and spread, down 32% and 41% QoQ, respectively, though BZ price has come back up 0.4% from last week, as buying sentiment for downstream PS in the region remained muted.        

- Integrated PET/PTA spread at 6-year low. Integrated PET/PTA spread plunged 16% WoW to US$171/t as PX and MEG prices continued to climb 4.1-4.2% WoW. PET price was stable WoW although demand returned from a long holiday during Chinese New Year. We expect higher feedstock cost and stronger seasonal demand ahead of summer to drive PET price in coming weeks.  

Investment view: The petrochemical sector index slid 0.8% WoW, underperforming the market (-0.7% WoW), pulled down by PTTGC (-3% WoW) but boosted by market optimism on IVL’s earnings outlook, driven mainly by a greater proportion of high value-added products. Its share price rose another 2.9% WoW to a 22-week high. We still prefer PTTGC at current share price, where valuation is undemanding.