Petrochemicals

Petrochemical price monitor 

 

- PE spread squeezed by rising naphtha price. Although PE/PP prices rose 1.3-3.3% WoW, naphtha price also rose, narrowing product spread over naphtha by 0.4-1.9% WoW. Only PP-naphtha spread widened 1.3% WoW as PP price was driven by rising concerns about possible supply shortages as planned plant turnarounds begin next month. Buying sentiment for PE, however, remained sluggish as buyers stayed sidelined in key markets like China ahead of the Lunar New Year holidays starting next week. Spread for non-integrated PE producers fell 12-16% WoW as ethylene and propylene prices rose at a higher pace. 

 

- Aromatics prices up WoW. Aromatics prices inched up 1-1.9% WoW, driven by higher naphtha price and improved buying sentiment fostered by higher oil prices. Still, this was far behind the rise in naphtha cost, hence product spread narrowed 4.9-6.8% WoW. BZ looks better with higher demand for styrene monomer (SM) on the back of concerns about tightening regional availability, which pushed up SM price. Price of polystyrene also rose 1.8% WoW on tighter supply.        

 

- Higher feedstock cost pressured integrated PET/PTA spread. Integrated PET/PTA spread fell 6.1% WoW to only US$200/t due to higher PX and MEG prices. PET and PTA prices were stable WoW. Demand for PET ahead of Chinese New Year was disappointing, making it difficult to adjust prices to reflect higher feedstock (PX and MEG) cost. Chinese New Year will make for a quiet market.  

 

Investment view: The petrochemical sector index rose 4.2% WoW, outpacing the market (+0.4% WoW), boosted by market optimism on IVL’s earnings outlook despite weakening product spread. Its share price jumped 15.8% WoW to a 20-week high. PTTGC’s share price also increased 0.8% WoW on better sentiment toward the sector as oil prices rose. The impact of lower oil price on demand for petrochemical products is as yet unknown. We prefer PTTGC at current share price on undemanding valuation.