Equity Analysis /

Thai (Bualuang):Refining&Chemical-GRM on the rise;most chemical spreads weakened

  • Headline GRM fattened WoW

  • Ethylene and Propylene spreads weakened WoW

  • HDPE and PP spreads continued to decline WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
1 June 2021

Headline GRM inched up last week, driven by fatter gasoline crack spread. The COVID-19 resurgence in many Asian countries may reduce petroleum demand in the short-term, but we expect the consumption of refined products to start picking up once the situation eases. And recovering demand should boost GRM in the months ahead. TOP is our refinery value pick, as its production cost efficiency makes its earnings profile relatively more leveraged for a rebounding GRM. Also, SPRC is a trading play on the “gasoline high season” theme.

Last week, most chemical prices and spreads decreased further, due to falling Ethylene feedstock cost, subdued regional demand, and plentiful supply. 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 via future acquisitions. Furthermore, the second-quarter is normally a peak season for polyester chain products (IVL’s main products).

Headline GRM fattened WoW

The mean Singapore GRM expanded US$0.07 WoW to $1.71/bbl, driven by fatter gasoline crack spread. Declining inventories in Singapore, lower exports from China, and strong demand in North America boosted gasoline spread by $0.54 WoW to $9.78/bbl (most positive for SPRC).