Equity Analysis /

Thailand: Refining & Chemical-GRM dropped; most chemical spreads fattened

  • Headline GRM moved further downward WoW

  • Ethylene and Propylene spreads fattened WoW

  • HDPE spread strengthened; PP spread remained stable WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
30 November 2021

Headline GRM continued to decline last week, squeezed by slimmer crack spreads across most product categories. Despite a short-term hiccup on concerns over a new COVID-19 variant, Omicron, the reopening of many economies worldwide looks set to boost broad demand for refined petroleum. Furthermore, the upcoming winter season 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 rebound in GRM.

Last week, chemical prices mostly declined, squeezed by lower feedstock costs and subdued regional demand. Nevertheless, a sharp drop in feedstock costs pushed up spreads across most product categories that we monitor. Our top Chemical pick remains IVL, as it makes compounds that are molded into essential products (which are in ever greater demand in the COVID-19 era). And there’s scope for upside from its long-term growth profile via future acquisitions.

Headline GRM moved further downward WoW

The mean Singapore GRM decreased further by $1.41 WoW to $3.01/bbl, squeezed by slimmer crack spreads across most product categories. Higher supply from China and India, slower demand from Indonesia, and increased inventories in Singapore pushed the gasoline spread down by $3.29 WoW to $10.68/bbl (most negative for SPRC). Furthermore, greater exports from China and India squeezed the jet/kerosene and diesel spreads $0.84 WoW to $7.30/bbl and $1.39 WoW to $9.06/bbl, respectively, (most negative for TOP). In addition, increasing supply in Asia on the back of higher utilization rates of refineries boosted the high-sulphur fuel oil spread $0.11 WoW to -9.09/bbl (still much weaker than its former typical pre-IMO2020 era range of negative-$4-5/bbl).