Petrochemicals

Petrochemicals

Margin of naphtha-based producers continued to improve. Naphtha-based
olefins producers continued to enjoy a widening in product spreads of 0.3-5.5%
WoW, especially for PP due to more positive market sentiment. This was despite a
rise in naphtha price of 0.4% WoW. So far this quarter, average spread for PE/PP
has stepped up a good 5-14% QoQ. Average spread YTD has also widened by 22-
37% YoY. Also benefiting from higher LDPE price but flat ethylene price were nonintegrated
LDPE producers like TPIPL, which saw LDPE-ethylene spread increase
12.1% WoW to US$185/t. As expected, the rise of ethylene price in the previous
two weeks lifted its derivatives prices 0.3-1.4% WoW.
PX turned up slightly WoW on supply constraints. PX price rose 2.9% WoW to
US$1,448/t, driven by lower feedstock from refineries, which were shuttered for
maintenance in May. Also, we believe a more solid PTA price has attracted
producers to ramp up their operating rates, implying more PX needs. PX spread
over naphtha improved 5.9% WoW to US$678/t but this remained low compared
with the YTD average of US$722/t up to May 2013. PX price continues to be one of
the worst performers in 2Q13, falling by 11% QoQ.
PET/PTA spread slid WoW on a hike in PX price. Integrated PET/PTA spread fell
5.7% WoW despite higher PTA price (+0.5% WoW), squeezed by a higher PX price.
Although the YTD average spread managed to hang on above US$300/t, it
remained 5% below the same period in 2012 while the QTD average spread in 2Q13
was still 3% lower than in 1Q13. Demand growth for PET and polyester will
continue to track GDP growth but sellers are still unable to demand high prices
due to excess supply of intermediate feedstock, PTA, in the market.