Equity Analysis /

Thailand: Refining & Chemical - GRM inched up; most chemical spreads weakened

  • Headline GRM expanded further WoW

  • Ethylene and Propylene spreads weakened WoW

  • HDPE and PP spreads dropped WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
14 December 2021

Headline GRM continued to rise last week, boosted by fatter crack spreads across most product categories. Despite a short-term hiccup from 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 and spreads mostly declined, pressured by slackened regional demand, plentiful product availability, and a sharp increase in Naphtha feedstock cost. Our top Chemical pick remains IVL, as it makes compounds that are molded into essential products (which remain in great demand in the lingering COVID-19 era). And there’s scope for upside from its long-term growth profile via future acquisitions.

Headline GRM expanded further WoW

The mean Singapore GRM increased further by $2.08 WoW to $5.41/bbl, boosted by fatter crack spreads across most product categories. Improving demand across Asia and declining inventories in Singapore pushed the gasoline spread up by $3.14 WoW to $14.28/bbl (most positive for SPRC). In addition, stronger regional demand and reduced inventories in Singapore also boosted the jet/kerosene and diesel spreads $2.18 WoW to $9.93/bbl and $2.03 WoW to $11.53/bbl, respectively, (most positive for TOP).

Meanwhile, lower inventory levels in the region supported the high-sulphur fuel oil spread stable WoW at -8.22/bbl (still much weaker than its former typical pre-IMO2020 era range of negative-$4-5/bbl).