THAILAND: Naphtha operators benefit

Fitch Ratings says Thailand’s naphtha-based petrochemical makers will continue to benefit from lower oil prices this year at the expense of gas-based producers whose margins have been squeezed.

Most gas-based operators’ margins have narrowed because gas prices have been more resilient and petrochemical product prices are still largely linked to naphtha prices.

Naphtha prices fell by 43% in 2015 but Thailand’s average pooled gas price dropped by only 13%.

The prices of olefin and polyolefin products fell respectively by 20-40% and 20-25% after the drop in naphtha costs.

The earnings before interest, tax, depreciation and amortization (Ebitda) margin for the chemical business of Siam Cement Plc, the largest naphtha-based maker in Thailand, rose to 20% in 2015 from 8% in 2014.

In contrast, the Ebitda margin for olefins and derivative business at PTT Global Chemical Plc, the largest gas-based maker in Thailand, fell to 24% in 2015 from 26% in 2014.

Fitch expects polyolefin spreads to naphtha to remain strong for Thai producers in 2016, although new capacity coming on stream will likely put some pressure on spreads, especially for polypropylene.

Source: Daily “The Bangkok Post”, Bangkok; 12 Mar 2016

(Syed Rashid Ali, Karachi, Pakistan)