Petrochemicals

Petrochemicals

- PE price stabilized despite lower feedstock cost. Despite weakening naphtha
and ethylene prices, PE prices were stable WoW. This lifted product spread over
naphtha by 0.6-0.7% WoW. We believe this arose out of the usual lack of market
transactions late in the year. LDPE-ethylene spread jumped 5.9% WoW to a 4-
month high of US$270/t, up 50% from six months ago. Average LDPE-ethylene
spread YTD outperformed other products in 2013, rising 51% WoW to US$270/t.
- PX price continued to recover but outlook still sober. PX price continued to
crawl up 0.6% WoW to US$1,441/t, the fourth WoW increase in a row. However,
current price and spread are 12% and 29% lower than 12 months ago, a reflection
of market concern on pressure from new supply. Margin is expected to narrow
even further in 2014F from new supply. BZ price remained stable at an 8-month
high, supported by strong sentiment in western markets.
- Integrated spread up on higher PET/PTA prices. Integrated PET/PTA spread
inched up 1.7% WoW to US$215/t despite higher feedstock cost, PX and MEG. This
was helped by higher PET and PTA prices of 0.8-1% WoW. Spread remains weak
and close to a 52-week low at US$211/t. 4Q13TD average spread fell 9% QoQ to
US$258/t due to low seasonal demand.
Investment view: The sector (-0.4% WoW) outperformed the market (-2.4% WoW),
supported by PTTGC (+0.3% WoW) but IVL continued to fall 3% WoW on weak PET/PTA
spread. We expect the petrochemical market to become more active early next year
on restocking ahead of Chinese New Year in late Jan 2014. We continue to expect the
olefins chain to outperform aromatics on a better balance in demand and supply for
olefins derivatives in 2014F. We prefer SCC (BUY, TP: Bt575) and PTTGC (BUY, TP: Bt92)