Petrochemical price monitor

Petrochemical price monitor 

- High ethylene price still hitting non-integrated PE producers. Tight regional supply from maintenance shutdowns drove ethylene price to an 8-month high of US$1,405/t (+1.1% WoW) despite lower naphtha cost (-3% WoW). PE prices moved in tandem with naphtha weakness (-0.7% to -2.5% WoW) on weaker demand in the region. The QTD average PE/PP prices were more encouraging, up 16-18.3% QoQ on higher oil price. This is good for integrated olefins producers, whose product spread over naphtha rose 17-21% QoQ. Non-integrated PE producers continued to suffer from skyrocketing ethylene price with product spread down into negative territory; it is down 80-90% QoQ to a slim margin of only US$3-35/t vs. cash cost of US$120-150/t.    

- Aromatics price down for the third week. Among two key aromatics products, BZ price moved down for the third week, falling another 5.7% WoW on concerns over weakening demand for downstream styrene monomer. The market has fully absorbed the impact from the supply shortage caused by the unplanned shutdown of Dragon Aromatics in China. This factor also pushed PX price down 2.1% WoW to a 5-week low. Supply additions will gradually enter the market during 2H15, pressuring aromatics prices.   

- Lower feedstock cost lifted integrated PET/PTA spread. PET/PTA feedstock prices have stepped down steadily for the past three weeks, falling a further 2.1-4.3% WoW, especially MEG price. This widened the integrated PET/PTA spread to exceed US$300/t for the first time since Dec 2014. Lower MEG price came from slower demand in the region and the restarting of plants that were taken offline for some weeks, including a 200ktpa-MEG plant at Sinopec Nanjing Yangzi Petrochemical, which was shut in April following an explosion at the plant. The plunge in feedstock cost sidelined buyers, pulling PET/PTA price down 1-2% WoW.   

Investment view: The Petrochemical sector index was flat QoQ, slightly better than the market (-0.1% WoW). Supporting this was a gain in PTTGC’s share price of 1.6% WoW on market optimism about its earnings momentum as PE product prices improved 16-18% QoQ. Feedstock cost will also be lowered by lower gas cost as the earlier fall in oil prices begins to be felt on gas prices. PTTGC remains our top pick among downstream players. IVL slid another 3.8% WoW on disappointing earnings in 1Q15 due to inventory loss. Its performance is expected to improve strongly in 2Q15, acting as a share price catalyst in the near term.