Equity Analysis /
Thailand

Thailand: Chemical- 3Q22 playbook: outstanding growth play remains a good choice

  • Low season, new capacity, higher costs to pressure 3Q22 spreads

  • More supply to squeeze the olefins spreads this year

  • Demand improvement to support PX margin in 2022

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
17 June 2022

The global economic growth will continue to bolster chemical demand and support most chemical spreads in 3Q22 and throughout 2022. Nevertheless, low seasonality, the commercial commencement of new capacity, and higher feedstock costs may squeeze some chemical spreads in 3Q22. Current valuations are still undemanding. Hence, we maintain our NEUTRAL sector rating with IVL as our preferred pick.

Low season, new capacity, higher costs to pressure 3Q22 spreads   

The reopening of economies worldwide is set to boost broad demand for chemicals further through 3Q22. Nevertheless, a period of seasonally low demand for chemical products (olefins and aromatics) normally starts in the second-quarter and runs into August. Moreover, the third-quarter is typically the beginning of low seasonality for polyester chain products. On the supply side, the launch of new capacities during the quarter and potential higher feedstock costs could be other factors pressuring chemical spreads in 3Q22. Given those trends, we expect most chemical margins to soften YoY and QoQ in 3Q22.