Equity Analysis /

Thailand (Bualuang): Chemical - 2022 playbook: selective outperformer play

  • Demand improvement and high season to boost 1Q22 spreads

  • New capacity additions to squeeze the olefins spreads in 2022

  • Recovering demand to support aromatics margins in 2022

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
16 December 2021

The global economic expansion will continue to bolster demand growth momentum and support most chemical spreads in 2022. That said, huge new capacity additions may squeeze some chemical spreads next year. Thai Chemical firms have moved ahead to decarbonize operations and this will sustain their long-term growth. Current valuations are still undemanding. Hence, we maintain our NEUTRAL sector rating with IVL as our preferred pick.

Demand improvement and high season to boost 1Q22 spreads   

As concerns over the Omicron COVID-19 variant have gradually eased, we therefore expect that broad demand for chemical products will improve further in 1Q22 aligned with global economic growth. Moreover, the first-quarter is normally a high season for chemical demand. Given those trends, we expect the chemical margins to sustain stable YoY and increase QoQ in 1Q22. While the limited supply availability tied to China’s dual control policy may present some scope for the upside to the chemical prices and spreads, the launch of new capacities during the quarter may limit the scale of spread rebounds.