Equity Analysis /

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

  • Headline GRM jumped WoW

  • Ethylene spread expanded; Propylene spread fell WoW

  • HDPE and PP spreads softened WoW

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
7 September 2021

Headline GRM surged 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 eases. 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 prices moved in various directions. On the one hand rising feedstock costs and supply tightness pushed up prices of some products, on the other slower demand put downward pressure on prices of some products. 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 jumped WoW

The mean Singapore GRM inched up by $0.84 WoW to a seventeen-month high of $3.75/bbl, boosted by fatter crack spreads across all product categories. Improving demand in Asia and supply disruption tied to hurricane Ida in the US pushed the gasoline spread up by $0.11 WoW to $10.33/bbl (most positive for SPRC). Also, stronger regional demand and greater exports to Europe boosted the jet/kerosene and diesel spreads by $0.83 WoW to $5.60/bbl and by $1.17 WoW to $5.19/bbl, respectively (most positive for TOP). Moreover, increasing demand from South Asia pushed the high-sulphur fuel oil spread up by $1.49 WoW to negative-$1.32/bbl (better than its former typical pre-IMO2020 era range of negative-$4-5/bbl).