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GRM fattened; most chemical spreads weakened

  • Headline GRM inched up WoW

  • Ethylene spread increased; Propylene spread dropped WoW

  • HDPE and PP spreads declined WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

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Bualuang Securities
7 April 2021

Headline GRM expanded slightly last week, boosted by a fatter gasoline crack spread. The global COVID-19 resurgence may squeeze petroleum demand in the short-term, but infection rates are now declining in many countries, supported by the rolling out of vaccination programs, so we expect the consumption of refined products to start increasing soon. And recovering demand should boost GRM in the months ahead. Moreover, spring refinery maintenance season has started, so supply will tighten, supporting GRM. TOP is our refinery value pick, as its production cost efficiency makes its earnings profile relatively more leveraged to a rebounding GRM. SPRC is a trading play on the “gasoline high season” theme.

Last week, most chemical prices and spreads softened, squeezed by slower demand in the key market, China.  Our top Chemical pick remains IVL, as it makes compounds that are molded into essential products (which are in even greater demand in the COVID-19 era). And there’s scope for upside to its long-term growth profile from future acquisitions. Furthermore, the second-quarter is normally a peak season for polyester chain products (IVL’s main products).

Headline GRM inched up WoW

The mean Singapore GRM rose US$0.06 WoW to $1.72/bbl, driven by a fatter gasoline crack spread. Stronger demand in the US and Asia and lower regional supply (unplanned outages of some refineries) boosted gasoline spread by $1.48 WoW to a 13-month high of $10.49/bbl (most positive for SPRC).