Equity Analysis /

Thailand: Refining & Chemical - GRM gained; most chemical spreads declined

  • Headline GRM fattened further WoW

  • Ethylene spread increased; Propylene spread declined WoW

  • HDPE and PP spreads slipped WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
14 September 2021

Headline GRM continued its uptrend last week, boosted by fatter crack spreads across all product categories. The COVID-19 resurgence in many countries may reduce petroleum demand in the short-term, but we expect consumption of refined products to start picking up again once the situation improves. Demand recovery 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 price movements were a mixed bag. On the one hand higher feedstock costs and product tightness pushed up prices of some products, but then subdued demand put downward pressure on prices of others. Nevertheless, sharp increases in feedstock costs squeezed spreads of most chemicals. 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 due to its long-term growth profile via future acquisitions.

Headline GRM fattened further WoW

The mean Singapore GRM increased by $1.43 WoW to an eighteen-month high of $5.18/bbl, boosted by fatter crack spreads across all product categories. Recovering regional demand and supply disruption tied to hurricane Ida in the US pushed the gasoline spread up further by $0.97 WoW to $11.31/bbl (most positive for SPRC). Also, stronger demand in Asia led by Vietnam boosted the jet/kerosene and diesel spreads by $0.63 WoW to $6.23/bbl and by $1.01 WoW to $6.20/bbl, respectively (most positive for TOP). Moreover, rising demand from South Asia pushed the high-sulphur fuel oil spread up by $3.20 WoW to positive territory of $1.88/bbl (much better than its former typical pre-IMO2020 era range of negative-$4-5/bbl).