Petrochemical price monitor

PE-naphtha spread continued to strengthen. Although naphtha price rose another 0.6% WoW to reach a rise of 14% over the last three weeks, PE-naphtha spread was fairly strong with an increase of 0.2-1.4% WoW. Behind this is the tight supply in the region brought by maintenance shutdowns of several plants. Higher oil price drove drive PE prices up 0.4-1.1% WoW, especially LLDPE, as more than 1mtpa-LLDPE regional capacity was idled for maintenance, including PTTGCs 400ktps-LLDPE plant. Non-integrated PE producers still had to work with a thin spread over ethylene of lower than US$50/t vs. cash cost of US$120-150/t.    

 

Aromatics price rise paused. PX and BZ prices slid 0.3% and 3.1%, respectively WoW after a steady WoW rise since mid-Mar. We believe the impact of aromatics supply shortage following the accident at Dragon Aromatics in China and higher demand in China is fully priced in and the market has reached a demand/supply balance despite the restart of Xianglu Petrochemical’s 4.5mtpa-PTA plant, which will drive demand for PX until supply from Dragon Aromatics is back to normal.  

 

 Integrated PET/PTA spread improved on easing feedstock cost. PET/PTA feedstock prices eased 0.2-0.3% WoW, supporting an improvement of 1.5% WoW to US$235/t in integrated PET/PTA. Lower MEG price came from a regional selling frenzy coupled with higher MEG inventory levels in major markets like China despite the recent explosion at a 200ktpa-MEG plant at Sinopec Nanjing Yangzi Petrochemical. Demand was seasonally strong, keeping PET price stable. This will allow PET sellers to keep selling prices stable for now, despite lower feedstock cost.   

 

Investment view: PTTGC’s share price gained 3.2% WoW to a 5-month high that also led the petrochemical sector index (+0.9% WoW) to outperform the market (-0.2% WoW) on market optimism about earnings, aided by improving olefins and aromatics product spreads. PTTGC remains our sector pick. IVL slid another 5.1% WoW from lower investor appetite for its new acquisitions and potential slide in product margin due to high PX and MEG prices brought by unplanned shutdowns by regional producers.