Equity Analysis /

Thailand: Refining & Chemical-GRM expanded gain; most chemical spreads weakened

  • Headline GRM fattened further WoW

  • Ethylene and Propylene spreads declined WoW

  • HDPE and PP spreads slid WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
6 May 2021

Headline GRM strengthened further last week, with fatter crack spreads across most product categories. The global COVID-19 resurgence may squeeze petroleum demand in the short-term, but we expect the consumption of refined products to start increasing 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 to a rebounding GRM. Also, SPRC is a trading play on the “gasoline high season” theme.

Last week, chemical prices and spreads mostly declined, squeezed by a sharply higher Naphtha feedstock cost in the face of slower regional demand. 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 from future acquisitions. Furthermore, the second-quarter is normally a peak season for polyester chain products (IVL’s main products).

Headline GRM fattened further WoW

The mean Singapore GRM fattened by a further US$0.39 WoW to a 13-month high of $3.17/bbl, with fatter crack spreads across most product categories. Inventory diminishment in Singapore and an improving demand outlook amid the inauguration of travel bubbles between some countries boosted diesel and jet/kerosene spreads by $0.04 WoW to $4.74/bbl and by $0.87 WoW to $4.41/bbl, respectively (most positive for TOP).