Petrochemicals
Petrochemical price monitor
Petrochemicals
A better week for naphtha crackers. Naphtha price rose another 2.1% WoW to US$518/t on higher oil price, but PE-naphtha spread still climbed 1.1-2.9% WoW as polymer prices continued to go up from higher ethylene cost and tight supply. Several ethylene and PE plants entered into planned shutdowns in April, including PetroChina’s 600ktpa-HDPE/LLDPE plant and PTTGC’s 550ktpa-HDPE plant; these will reopen around mid- or late-May. Non-integrated PE producers continued to be hurt by thin spread over ethylene.
Higher demand, limited supply aid PX price. PX price continued its rise, up 2.4% WoW, a lower rise than seen in the prior two weeks after the accident at Dragon Aromatics in China that cut regional PX supply by 4.3%. We expect PX price to rise further after the restart of Xianglu Petrochemical’s 4.5mtpa-PTA plant after a brief closure due to disruption of PX supply from Dragon. The PTA plant will have to source PX from others and this could continue to drive PX price in the near term.
Integrated PET/PTA spread up sharply on higher PET price. PET price rose 9.5% WoW on stronger seasonal demand and higher prices for upstream products, PX and MEG. This lifted integrated PET/PTA spread 24.6% WoW to US$231/t, the highest WoW rise since July 2014, despite a sharp rise in PX and MEG prices due to accidents at regional producers. MEG price surged to a 9-month high of US$998/t (+10% WoW), backed by firmer upstream ethylene prices and an explosion at a 200ktpa-MEG plant of Sinopec Nanjing Yangzi Petrochemical in China.
Investment view: The petrochemical sector index rose 0.2% WoW, outperforming the market (-0.7% WoW), still driven by PTTGC, whose share price rose 2% WoW, up for the fourth straight week, but still 9.6% below its 52-week high. We believe this reflects optimism about earnings momentum, supported by improving olefins and aromatics product spreads. On the other side of the spectrum, IVL’s share price fell 3.8% WoW as market optimism on its continued acquisitions is fully priced in and higher PX and MEG prices brought by unplanned shutdowns by region producers will hurt its margin.
