Equity Analysis /

Thailand (Bualuang): Chemical - 2Q22 playbook: stick with resilient growth play

  • More supply, low season, higher costs to curtail 2Q22 spreads

  • Incremental capacities to squeeze the olefins spreads in 2022

  • Improving demand to support PX margin this year

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
18 March 2022

The global economic growth will continue to boost chemical demand and support most chemical spreads in 2Q22 and throughout 2022. However, huge new capacity additions may squeeze some chemical spreads this year. Current valuations are still undemanding. Hence, we maintain our NEUTRAL sector rating with IVL as our preferred pick. Tactically, if the oil price peaks out, downstream space like chemical sector should be back in the game.

More supply, low season, higher costs to curtail 2Q22 spreads   

The reopening of economies across the globe looks set to strengthen broad demand for chemicals through 2Q22. However, the second-quarter is normally a period of seasonally low demand for most chemical products (but it is typically the seasonal peak for polyester chain products). On the supply side, the tight supply situation has been alleviated compared to 2Q21. Also, the launch of new capacities during the quarter and potential higher feedstock costs could be other factors pressuring chemical spreads in 2Q22. Given those trends, we expect most chemical margins to soften YoY and QoQ in 2Q22.